Deutsche Bank ponies up $2.5B for cooking Libor; industry wide settlements approaching $9B.

The dubious distinction of drawing the largest fine for manipulating Libor goes to Deutsche Bank. Their total tab is now $3.5B. That leaves UBS in a distant second place at $1.6B.

Check out two articles on April 22:

• Wall Street Journal – Deutsche Bank to Pay $2.5 Billion to Settle Libor Investigation With U.S., U.K. Authorities
• New York Times – Deutsche Bank to Pay $2.5 Billion Fine to Settle Rate-Rigging Case

Deutsche Bank will pay slightly over $2.5 billion to settle up for manipulating Libor, Eurbor, and Tibor (Tokyo interbank). Several specific Directors and VPs will be fired.

A subsidiary company in Britain will plead guilty to violating American criminal laws.

I think that means that one tiny sliver of the consolidated entity can’t operate in the United States. I’ll make a wild guess that specific subsidiary wasn’t doing anything in the United States anyway so the criminal charge will have no impact on the subsidiary and be a mere one-day headline to the world-wide entity.

Both articles indicate the bank was intentionally slow in cooperating with British authorities. During the dawdled gathering documents hundreds of audio recordings were erased.

NYT article says the fine will be split this way:

• $600M – NY DFS
• $800M – CFTC
• $775M – DoJ
• $340M – Financial Conduct Authority

Both of the articles indicate Deutsche bank is still under investigation for manipulating forex and money laundering. Both articles indicate their sources expect fines for forex to be higher than the Libor settlement.

3/19 – Wall Street Journal – Bank of New York to Pay $714 Million to Resolve Currency Suits – Cost to settle up government and private litigation for manipulating foreign currency exchange rates will cost Bank of New York Mellon $714M. Bank fessed up to giving some customers the worst exchange rate of the day instead of the best as they claimed, according to the article. Settlement split up as follows:

• $167.5M – Department of Justice
• $167.5M – NY state
• $335M – private lawsuits
• $30M – SEC
• $14M – Department of Labor

4/16 – Several headlines suggest BofA is ready to settle up on Forex. All articles are behind subscription walls. None of the major news sources have comments yet.

Total settlements

4/16 – I’m doing my own score-keeping on the Libor and forex settlements. If my stray notes and guesses are close, the total tab will be around $17B for cheating on forex. Libor actual and rumored settlements I’m aware of are approaching $8B.

4/23 – My spreadsheet on Libor settlements is tracking with the fines for five banks listed in the graph at the WSJ article linked above. With the higher-than-expected settlement for Deutsche Bank, the industry wide fines are just a smidgen under $8.7B. There are open investigations of Bank of America, JP Morgan, and Citigroup, although the comments in the above two articles indicate their settlements will be much smaller than the other banks because those three have a small share of the total Libor market.

I’ve added $2.5B to my tracking of industry wide settlements for manipulating forex to allow for the rumored amount from Deutsche Bank. My current estimate is the total tab will be around $19.5B.

My wild guess for a point estimate on total cost for those two fiascos is $28.2B.

Some perspective on the total settlements

For that much money, the US government could build 2 nuclear powered aircraft carriers with enough change left over to buy all the aircraft needed for one carrier (an educated wild guess).

Or, the US could pay for almost 12 years of federal elections. The 2010 and 2012 campaigns cost about $10B. So $28B would fund that four-year cycle almost three times over.

That $28B of fines is about equal to the combined annual billings of Deloitte ($14.9B) and Ernst & Young ($11.7B). The banking industry has wasted an amount roughly equal to the annual billings of 106,000 employees of the two largest Big 4 firms.