Chief witness Deutsche Bank cooperating in EU probe over bond price-fixing

The EU's latest investigation into financial trading practices could ensnare Germany's biggest lender, adding to its litany of legal troubles at a vulnerable time. Its stock has more than halved this year.
Quelle: mauritius images
Deutsche Bank trading floor in London.
(Source: mauritius images)

Deutsche Bank said it was cooperating with European Union antitrust authorities in a probe into a suspected bond-trading cartel involving four banks, with sources adding that Germany's largest lender would act as a principal witness in the case.

On Thursday, the EU Commission charged that traders at the four banks – Deutsche, Credit Agricole, Credit Suisse and one other lender – exchanged market-sensitive information several times between 2009 and 2015 in a bid to manipulate the prices of dollar-denominated bonds.

The Commission did not explicitly name the banks, but said its investigation focused on the conduct of traders at the four institutions and the contact among them, largely through online chatrooms. According to Handelsblatt, the fourth bank could be Bank of America, which together with Deutsche agreed to pay a combined $65.5 million (€57.3 million) last year to settle US litigation over manipulating bond-market prices.

Regulators worldwide have penalized the financial industry billions of euros in recent years for rigging financial benchmarks. If found guilty of breaching EU antitrust rules, the banks could face fines of up to 10 percent of their global turnover. At its discretion, the Commission can offer whistleblowers leniency.

Dodging the bullet

Deutsche Bank said it does not expect to be fined, as the lender was "cooperating proactively with the European Commission on the matter,” a spokesman said. According to financial sources, Germany's largest bank is serving as a chief witness in the probe. The bank declined to comment.

Credit Suisse also said it was also cooperating with the EU authorities in the investigation, which the lender said was limited to one employee who left the bank in 2016.

On Friday, Deutsche Bank's shares were little changed around €7, after sliding 7 percent a day earlier. To add to the bank’s woes, Canadian investment bank RBC on Thursday lowered its revenue estimates for Deutsche Bank due to the "lack of flexibility in costs" and unfavorable prospects in investment banking. Over the past year, Deutsche Bank’s stock has plummeted 55 percent.

The bank’s image has also been seriously dented by accusations of tax avoidance and money laundering. In late November, public prosecutors launched a full-scale raid at the lender’s Frankfurt headquarters, on suspicions that employees helped smuggle dirty money into tax havens under the bank's accounts.

Yasmin Osman is a reporter on Handelsblatt's banking desk in Frankfurt. Jeremy Gray adapted this story into English with supplemental coverage from Reuters. To contact the author: [email protected]