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Watchdog slams Deutsche Bank for Libor probe response: report

A man walks past Deutsche Bank offices in London December 5, 2013. REUTERS/Luke MacGregor
A man walks past Deutsche Bank offices in London December 5, 2013. REUTERS/Luke MacGregor

FRANKFURT (Reuters) - German banking watchdog BaFin criticized Deutsche Bank's management for the way it responded to a probe into manipulation of the Libor benchmark interest rate, according to German magazine Der Spiegel.

BaFin and other regulators are investigating more than a dozen banks and brokerages over allegations they manipulated benchmark interest rates such as Libor and Euribor, which are used to benchmark trillions of dollars of financial products from derivatives to mortgages and credit card loans.

BaFin launched a probe last year on which it is working with the Bundesbank and accountant Ernst & Young , delving into suspected misconduct by individual traders and their counterparts at other banks.

"The Ernst & Young report shows that insufficient efforts were made to investigate and clear up events in the bank," weekly Der Spiegel on Sunday quoted a BaFin report as saying. That BaFin report summarized preliminary findings that the regulator submitted to Deutsche Bank in August.

It is also still not clear "whether senior management was involved in or had knowledge of possible manipulation attempts", it said, adding the Bundesbank's part of the probe found "grave organizational shortcomings" at Deutsche Bank.

BaFin declined to comment on the Spiegel report.

Deutsche Bank said investigations were underway and reiterated it was closely co-operating with various regulatory probes including the one being led by BaFin.

"We reiterate as per the current status of the investigations, we can say that no current or former member of the management board had any inappropriate involvement," a spokeswoman for the bank said.

Financial sources told Reuters last month that BaFin had deepened its probe to see how much top managers at Deutsche Bank knew about any manipulation.

The move comes as Deutsche Bank pursues an ambitious plan to transform its corporate culture led by its co-chief executives Juergen Fitschen and Anshu Jain, and as it works through a long list of scandals, investigations and fines that came in the wake of the financial crisis.

According to Der Spiegel, BaFin in its report raised doubts about how sweeping the cultural change really was.

"As new management, you announced cultural change... But in the case at hand it appears that you did not take clear action, especially in terms of staff," it said.

BaFin said that the fact that an internal probe at Deutsche Bank's trading business in 2009 was stopped, "indicates that business areas, in this case trading, influenced internal auditing in a manner that may have been inappropriate".

Deutsche Bank traders who were recently fired from their jobs at the bank have accused manager Alan Cloete, formerly head of global finance and foreign exchange, of calling an end to an internal investigation of Libor practices at the lender to avoid damaging then-investment bank head Jain.

Deutsche Bank had denied Cloete ever said that, and has launched an appeal against a German labor court ruling that forced it to reinstate the four traders.

(Reporting by Thomas Atkins, Alexander Huebner and Maria Sheahan; editing by Keiron Henderson)

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