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Rate-Fixing Investigations Escalate in the U.K. and GermanyScandal

July 9, 2012
[ by Howard Haykin ] The global investigation into manipulation of interbank lending rates widened Friday as Britain's fraud squad entered the case, while sources noted that Germany's markets regulator had launched a probe into Deutsche Bank. Those investigations are in separate and apart from examinations currently being conducted by authorities in the U.S., Europe, Japan, and Canada - which are examining more than a dozen big banks over suspected involvement in the rigging of the London Interbank Offered Rate, or Libor. The scandal has exposed tremendous concerns throughout England, prompting British politicians to that the bankers responsible should end up in jail.  [C-I Note: All too similar to the histrionics expressed by U.S. Senators and Representatives.  That's not to say such comments are out of order.  In our opinion, the are very much in order, if based on appropriate evidence.] Germany's Special Investigation. Germany's BaFin regulator has initiated a "special investigation" into Deutsche Bank, a process which is more severe than a routine investigation initiated by a third party, according to sources that include a banker and a regulator - both of whom spoke on condition of anonymity. News of a "special investigation" in Germany also raises the stakes. Deutsche Bank said earlier this year it was cooperating with authorities investigating accusations of manipulation of Libor, the only German bank to make such a disclosure so far.  One of the sources who disclosed the investigation to Reuters said the results were expected in mid July. Deutsche Bank has disclosed that it is cooperating with the U.S. Department of Justice, the SEC, the CFTC, and the European Commission on Libor.  These inquiries relate to periods between 2005 and 2011. The SFO, or Serious Fraud Office. The SFO will now assemble a case team to pursue an investigation, which could take years.  A spokesperson noted that its queries would not be confined to Barclays, reiterating: "We don't mention Barclays in our statement, just Libor." In Britain, the lack of criminal prosecutions of the rate fixing has been one of the issues infuriating politicians, after e-mails were published showing bankers boasting of fiddling figures and congratulating each other with offers of champagne.  Britain's Serious Fraud Office said in a brief statement that its Director David Green had decided formally to accept the Libor case for investigation. The SFO reportedly considered launching an investigation into Libor last summer, but dropped the plans in September, in part for budgetary reasons.   The SFO has been criticized in the past for failing to achieve convictions in high-profile fraud cases. It gave no further details of how it would conduct its probe.  [C-I Note: This too sound a lot like what has been said in the U.S. - in reference to failures by the SEC and FINRA. The bank declined to comment on Friday but referred to its quarterly report, which said it has received subpoenas and requests for information from U.S. and European authorities in connection with setting interbank rates.  BaFin declined to comment specifically on whether it was probing Deutsche Bank but said it was in looking into suspected manipulation of Libor rates by banks.  "We are making use of our entire spectrum of regulatory instruments, so far as this is necessary," a spokesman said. For further details, go to:   [Reuters, via CNBC 7/6/12] or this related story:   [Reuters, via CNBC, 7/6/12, "Regulator Begins Probe of Deutsche Bank; Stock Falls"].