Bloomberg News

Deutsche Bank Libor Probe Should Be Public: Lawmakers

January 14, 2013

Deutsche Bank Libor Report Should Be Public, Lawmakers Say

Deutsche Bank AG and Germany’s finance regulator are under pressure to publish findings of a probe into whether the lender rigged interest rates, with lawmakers saying a rule meant to protect banks is crippling efforts to explore what’s wrong with financial markets. Photographer: Simon Dawson/Bloomberg

Deutsche Bank AG (DBK) and Germany’s finance regulator are under pressure to publish findings of a probe into whether the lender rigged interest rates, with lawmakers saying a rule meant to protect banks is crippling efforts to explore what’s wrong with financial markets.

“German secrecy rules for banking supervisors are way too broad, barring us from understanding what contributed to the financial crisis,” Gerhard Schick, a member of the Bundestag finance committee, said in an interview.

Unless a bank allows publication, German law bans the regulator, known as Bafin, from disclosing facts from reviews if it would be contrary to the lender’s interest. Lawmakers claim the practice, aimed at protecting business secrets, hinders effective controls.

“Deutsche Bank should allow Bafin to publish the report in any case,” said Schick, an opposition Green Party politician on the committee, which previously requested Anshu Jain, the bank’s co-chief executive officer, testify about Libor. “The public has a right to know what was going on.”

Regulators from Canada to Switzerland are investigating whether more than a dozen banks including Deutsche Bank, Barclays Plc (BARC) and Royal Bank of Scotland Plc colluded to rig the London interbank offered rate, the benchmark for more than $300 trillion of securities. UBS AG (UBSN), Switzerland’s largest bank, was fined $1.5 billion by U.S. and U.K. regulators for manipulating interest rates including Euribor. Barclays was fined 290 million pounds ($467 million) in June of last year for manipulating Libor and Euribor.

Criminal, Civil

The U.S. Justice Department is conducting a criminal probe in parallel with civil investigations by the Commodity Futures Trading Commission and the U.K. Financial Services Authority.

Deutsche Bank denies any wrongdoing by its executives. Christian Streckert, a company spokesman, declined to comment on whether the bank will allow the Libor probe results to be disclosed.

Shares of Deutsche Bank fell 0.7 percent closing at 36.985 euros in Frankfurt trading.

Lawmakers investigating the 2008 collapse of Hypo Real Estate Holding AG only received files from Bafin which were partly redacted, said Axel Troost, a member of the opposition Left Party. This information was restricted to lawmakers, the wider public had no access, Troost said.

‘Killer Argument’

“Bafin always takes the easy way out, simply citing these rules,” said Troost. “They use it as a killer argument and broad brush to fend off any request for information,”

Bafin, like its counterparts in other countries, is bound by the law not to disclose business matters of lenders it supervises, said Ben Fischer, the regulator’s spokesman.

Under current law, Bafin couldn’t disclose a report in such a probe, Germany’s Finance Ministry said in an e-mailed statement. The law shouldn’t be changed because it, “adequately limits the public need to be informed” in order to protect business secrets, the ministry said.

Attorneys and journalists have sued Bafin several times in recent years under the German Freedom of Information Act to have it disclose documents. In some cases, these suits successfully overturned Bafin’s reading of disclosure rules.

Schick said he has filed a complaint at the Federal Constitutional Court after the government only partly replied to a series of questions about Bafin’s practice in supervising banks that had been bailed out. He was given some sealed information, which he isn’t allowed to discuss in public.

‘Public Debate’

“Democracy requires a public debate of such issues,” he said.

In 2011, U.K. lawmakers criticized the U.K.’s FSA for resisting publishing results of its probe into the collapse of RBS citing confidentiality rules. Pressure came from lawmakers to publish the report after the regulator cleared former CEO Fred Goodwin and other executives of wrongdoing. The FSA eventually agreed to publish a version that lawyers for all parties were allowed to edit before its release.

Bafin started its special probe of Deutsche Bank in June, Raimund Roeseler, the regulator’s director of banking supervision, told lawmakers at a hearing in November.

An internal investigation cleared current and former management board members of any wrongdoing related to Libor, Deutsche Bank said in July. Some employees had “engaged in conduct that falls short of the bank’s standards,” it said.

Christian Democrats

Klaus-Peter Flosbach, a lawmaker in Chancellor Angela Merkel’s governing Christian Democratic bloc parliamentary group, said it’s in banks’ own interest to inform the public about misconduct and how it can be avoided in the future.

Social Democrat lawmaker Lothar Binding said the Finance Committee should ask the Finance Ministry to make Bafin’s findings available to the panel once the probe is concluded.

Indian property developer Unitech Ltd. (UT) which is suing Deutsche Bank over an interest-rate swap agreement told a U.K. judge today it wants to add Libor-manipulation accusations to the case. A $150 million loan and related swap contract are invalid because they were linked to the rate, which had been improperly fixed by lenders including Deutsche Bank, according to the company’s filings for a London court hearing.

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.


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