February 6, 2013 / 2:36 PM / 7 years ago

Exclusive: Deutsche Bank suspends traders over Euribor - source

FRANKFURT (Reuters) - Deutsche Bank has suspended five traders suspected of inappropriate conduct following an internal investigation into possible manipulation of the Europe Interbank Offered Rate (Euribor), a source familiar with the matter said on Wednesday.

A statue is pictured in front of the former head quarters of Germany's largest business bank, Deutsche Bank in Frankfurt, January 28, 2013. REUTERS/Kai Pfaffenbach

Germany’s flagship lender launched an internal investigation after regulators drew attention to potential involvement of Deutsche Bank staff in a global scam to manipulate benchmark inter-bank lending rates.

The traders, who worked on Deutsche Bank’s money market team in Frankfurt, were suspended on Tuesday, the source said.

Deutsche Bank, which suspended two traders last year for involvement in the manipulation of Libor (London interbank offered rate), would not say how many traders were suspended. It added that no current or former board members have been implicated.

Deutsche Bank is cooperating in the various investigations into potential manipulation of interbank offered rates and last week said it did not expect to announce a resolution of regulatory probes in to Libor this year.

On Wednesday British bank Royal Bank of Scotland was fined some $612 million to settle charges of rigging the London Interbank Offered Rate (Libor). Rival Barclays was fined $453 million in June while UBS paid about $1.5 billion in December.

Libor is just one of a raft of legal problems haunting Deutsche. It faces lawsuits accusing the bank of misleading investors about the quality of risky residential mortgage-backed securities, and it saw senior executives drawn into a widening tax evasion probe linked to carbon trading following a raid on its headquarters.

Deutsche on Wednesday referred to a statement made in January when it commented about progress on its internal probe, triggered by concerns that benchmark interest rates were being manipulated.

“Upon discovering that certain employees acted inappropriately, we have suspended or dismissed employees, clawed back unvested compensation, and will continue to do so as we complete our investigation,” the bank said at the time.

The investigation is being led by Deutsche Bank’s legal department, with the support of external counsel, and reports to the management and supervisory boards.

In July, the bank had said it had found that a limited number of employees, acting on their own initiative, had engaged in conduct that fell short of the Bank’s standards.

Euribor and its larger counterpart Libor are Europe’s key gauges of how much banks pay to borrow from their peers and are used to set the prices of swathes of financial products, from some mortgages to more complex derivatives.

They also are a key indicator of financial market tension. When the financial crisis hit in 2008 interbank rates soared as trust between banks crumbled.

More than 40 banks contribute toward setting the Euribor interbank lending rate.

When it released fourth-quarter earnings on January 31, Deutsche Bank said it had increased its litigation reserves to 1.8 billion euros ($2.4 billion) from 800 million euros, some of which is related to the Libor probe.

In addition, 2 billion euros of contingent liabilities remain, the bank said, referring to possible losses over and above existing legal provisions.

($1 = 0.7387 euros)

Reporting by Philipp Halstrick; Writing by Edward Taylor; Editing by Louise Heavens, Louise Ireland and Maria Sheahan

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