Deutsche Bank says the benchmark LIBOR rate was rigged by individual rogue traders. But co-CEO Anshu Jain carries some responsibility because he organized the investment banking operation in a way that caused conflicts of interest and allowed the fraud to flourish, Spiegel Online reported.
When Anshu Jain had finished his first annual results press conference as co-CEO of Deutsche Bank last Thursday, he tried his hand at a bit of irony. When asked what he thought of German draft legislation that could force financial institutions to separate their commercial and investment banking operations, he said the plan was comprehensive and gave no cause for celebration. "In other words, made in Germany," Jain said with a broad grin.
Eight months after taking the helm of the bank, Jain, who hails from India, has settled in to life in Germany. But plans afoot by banking supervisors are unlikely to be a laughing matter for him. Germany's federal financial supervisory authority BaFin is about to complete an investigation into the role Deutsche Bank played in the LIBOR (London Interbank Offered Rate) rate-rigging scandal.
Over the past few months, Deutsche Bank and its supervisory board chairman, Paul Achleitner, have repeatedly denied that there are any indications that board members were involved in the massive scandal surrounding the benchmark rate that affects some $350 trillion (€257 trillion) worth of financial transactions worldwide. Insiders, though, have leveled serious allegations against Jain, who headed the investment banking division during the period in question.
According to these sources, Jain may not have known that staff members in his division colluded with a number of other banks to influence LIBOR and related EURIBOR interest rates. But he was well aware of the conflicts of interest faced by his bank's money market traders, who were involved in establishing the LIBOR interest rates -- and who also bet enormous sums of money on the movement of these rates. The insiders point out that Jain was responsible for distributing millions of euros in bonuses to successful traders -- and they say that he had a nodding acquaintance at least with one of the men believed to have played a role in a LIBOR cartel: Christian Bittar.
Now, officials are trying to establish who at Deutsche Bank and other LIBOR banks is responsible for a system that accepted conflicts of interest in order to achieve maximum profits -- a system that BaFin head Elke König described in a SPIEGEL interview last year as "practically an invitation to manipulate." Read more.
