Deutsche Bank settles for $205 million in currency manipulation scheme
It is probably no surprise that Deutsche Bank AG would be named among the financial institutions caught in a currency manipulation scandal. For its role, the German/British investment bank agreed to pay $205 million in settlement. This comes after a settlement from just a few months ago for $240 million in a LIBOR scandal. This current fine is for “unlawful, unsafe and unsound conduct” in the Foreign Exchange (FX) Market. The announcement came on June 20, 2018 by Maria T. Vullo, the Financial Services Superintendent of NY state.
Some of the “unsound” activity involved sharing secrets and leads in online chatrooms. These chat rooms served as a hub for insider trading between banks. Chat rooms with inconspicuous names like “Butter the Comedian” shared confidential client information, discussed pricing information, and over a half dozen other offenses.
The reason why Deutsche is so culpable is because as a large bank it has major influence on the price values set in the FX market. The prices at which Deutsche decides to offer and buy currency impact the fluctuation of exchange rates. If bank employees are pre planning their prices with other banks they can set rates that are good for banks but bad for customers. This is unfair but it is what happened over at least a five year period.
From 2008 to 2013 several other major banks along with Deutsche participated in this scam. Many of them have already had their days in court. For those that have, they have contributed to the cumulative $10 billion amount paid back by guilty banks.
Deutsche’s $205 million settlement is barely noticeable among its $1.6 trillion in assets. But that doesn’t mean the banking giant isn’t taking a hit. At one point during the scandal, the bank had as much as $3.1 trillion in assets. With $1.6 trillion now, that’s a $1.5 trillion loss. It lost almost the same amount it’s currently worth! As a frequent name in bank fraud, each new loss is significant. And these losses have their impact. According to Bloomberg, “Deutsche Bank has spent more than $17 billion over the past decade in legal costs.” These aren’t the last of this banks financial woes. The bank has thousands more fraud cases pending against it. It is no telling how much more they will have to pay for their wrongdoings.