The financial press, including GlobalCapital, are fond of comparing Deutsche Bank and Barclays. The two banks are preparing new strategies, but both will be shaped by their Libor settlements.
Barclays settled first in 2012, and settled small — £290m for the first round of offences, compared with $2.5bn for Deutsche’s settlement on Thursday. But it had lasting effects, setting Barclays on the road to painful soul-searching about its commitment to bond trading. The tone from new chief executive Antony Jenkins became markedly less combative, and UK investment banking lost a staunch defender.
Deutsche meanwhile stayed defiant. Though nobody expected such a huge fixed income and currencies bank to escape benchmark scandals, the mood music was still aggressive. Deutsche wanted to be Europe’s last full scale bond house, and Barclays had surely taken most of the Libor-fuelled heat.
But what it did not do was get its house in order.
While Barclays was fined for failings between 2005-2008, Deutsche didn’t stop rigging rates until 2010, and certainly didn’t hold up its hands and co-operate.
Elements of Deutsche’s compliance and management told the regulator in 2011 that it had audited its Libor process and added systems and controls.
It had not, and the people involved knew it. In fact, its Libor systems didn’t go live until 2013.
Also in 2013, senior figures in the bank told the FCA that the German regulator, BaFin, wouldn’t let Deutsche share a Libor report it had asked for — a falsehood bound to be discovered, which it was, less than a month later.
Investment banking in general, and money markets and derivatives trading in particular, has a value, and needs voices raised to defend it.
But arguing that the abuses are relics of a bygone era, and that compliance, culture and conduct are ubiquitous, is made much harder by behaviour like Deutsche’s. Every time a bank CEO raises their head above the parapet to defend their industry, they are dragged down by another round of appalling revelations.
Let’s hope this really is the worst of it.