Deutsche Bank has agreed to pay out a record $2.5 billion fine to settle U.K. and U.S. government investigations into allegations of fixing global interest rates, just months after six other banks paid out $4.3 billion on similar charges. Activists say that the banks should have faced criminal charges.
“The question remains: does the punishment fit the crime?” writes Angela McClellan of Transparency International. “We think not: why allow a company to settle when they fail to cooperate with the investigation? Also, given the gravity of the situation a big fine won’t do, criminal charges should be considered as well.”
The banks have been accused of manipulating the global system of interest rates for $360 trillion in financial contracts, notably the London Inter Bank Offer Rate (LIBOR). LIBOR is set by the British Bankers Association which publishes an average of rates reported to them verbally by participating bankers. Such rates exist for as many as 150 different kinds of loans – mostly for overnight transfers between banks although they ultimately also affect the price of consumer loans like mortgages, car loans and credit card loans.
Since LIBOR rates are set based on private conversations held between a small group of individuals that are not subject to verification, the banks have allegedly been fixing the rates illegally for over 30 years to increase profits, according to whistleblowers.
Government investigators have published transcripts of instant messages between traders to prove that they were knowingly rigging the interest rates.