Libor rigging scandal: Pandora’s box opens up
- In 2007, Barclays alerted the US regulators about the low interbank rates (LIBOR) being submitted by banks which started the investigation.
- In August 2012, a joint New York-Connecticut investigation of 7 banks found libor anomalies.
- Later, the regulators released a cache of emails, electronic messages and phone calls showing the attempts to move the rate used to price £3.5 Tn of financial contracts.
What is Libor?
London Interbank Offer Rate (Libor) is the average interest rate calculated through the submitted interest rates by major banks for internal borrowing.
$2.5 Billion fine slapped on Deutsche Bank
- A record fine of $2.5 billion was levied on DB for rigging Libor.
- The bank has also been directed to fire 7 employees: 1 managing director, 4 directors and 1 vice-president, all based in London, together with 1 Frankfurt-based vice-president for being obstructive in the investigations.
- The total of $2.5bn includes $600 Mn to NYDFS, $800 Mn to CFTC and $775 Mn to DoJ.
The downhill descent accelerates
As if the $ 2.5 Bn fine was not enough, Deutsche Bank paid $925 Mn to Leo Kirch to end a long-running dispute with the media mogul.
Deutsche Bank makes way for some major downsizing
- Deutsche Bank announced the closure of almost 200 of its 700 branches by 2017 in Germany to cutback costs.
- The bank has also decided to cut down the operational costs by 3.5 billion euros ($3.8 billion) by 2020.
- 200 billion euros ($217.5 billion) will be slashed in investment bank assets along with a reduced number of countries of operations.
Investor revolt intensifies within Deutsche Bank quarters
- The high fine led to extreme cost cutting of over $50 billion, which triggered a voter revolt.
- In its annual meeting on 21 May 2015, Deutsche Bank shareholders doled out a vociferous vote of disapproval.
- 39% of investors refused to support the executive performances.
- The investors showed their disapproval with Deutsche's profit growth, alarming regulatory fines and the plans to restructure the bank.
Why is Anshu Jain stepping down?
- Deutsche Bank's former co-CEO Anshu Jain's decision was due to the criticism in media and from labor unions in Germany over the cutbacks and the decision to close several branches.
- Moreover, only 61% of shareholders showed faith in the bank's strategic plan. This has been a record-low approval in the history of Deutsche Bank annual meetings.
John Cryan takes over as Deutsche Bank’s CEO
- Deutsche Bank announced that John Cryan will take over as its new CEO.
- Cryan was formerly the CFO at UBS and has served on Deutsche's Supervisory Board since 2013.
- Anshu Jain will continue to act as the interim CEO till June end and will stay on as a consultant till January 2016, while his co-CEO Juergen Fitschen will exit on 19 May 2016.