Deutsche Bank (DB) Nearing EURIBOR Settlement For Over $170M

Legal hassles for major global banks continue unabated. The German lender – Deutsche Bank AG (DE:DBKGn) (NYSE:DB) – has agreed to settle investors’ lawsuit by paying $170 million. The bank was accused of manipulating the benchmark European Interbank Offered Rate (EURIBOR) and related derivatives.

The settlement, which was filed in the U.S. District Court in Manhattan, had been awaiting judge's approval. However, Deutsche Bank denied any wrongdoing and Troy Gravitt, spokesman of the bank, refrained from making any comments.

Deutsche Bank’s settlement follows recent similar settlements of Barclays (LON:BARC) Plc (NYSE:BCS) and HSBC Holdings (LON:HSBA) Plc (NYSE:HSBC) , under which the banks have agreed to pay $94 million and $45 million, respectively, and also won preliminary court approval.

The lawsuit had alleged that banks conspired to manipulate Euribor and set prices of the Euribor-based derivatives from Jun 2005 to Mar 2011, to reap profits. The plaintiffs in the case include Greenwich, Connecticut-based FrontPoint Australian Opportunities Trust and California State Teachers’ Retirement System.

Notably, the above mentioned case is among the many cases in the Manhattan court, under which banks are alleged for conspiring to rig rates and prices in financial and commodities markets.

EURIBOR is a widely accepted benchmark rate. Several financial institutions, mortgage lenders and credit card agencies lay down their own rates in relation to it. Derivatives and other financial products are connected to these rates.

Manipulation of such benchmark rates by financial institutions has triggered detailed investigations by regulatory bodies across Europe, Asia and America, claiming billions of dollars as settlements and fines. Investigations revealed huge scams, with nearly $300 trillion of loans, mortgages, financial products and contracts being linked to the tampered interest rates.

Regulatory authorities are investigating the matter and plan to put forward a landmark judgment, in a bid to prevent such shrewd practices in future, bring justice to the sufferers and punish the wrongdoers. While the settlements will put to rest a long-drawn investigation and banks can breathe relief, this comes as a huge blow to the financials. Further, such settlements could be called exemplary and trigger similar settlements by other banks depending on the charges against them.

Deutsche bank has lost nearly 4.1% on the NYSE year to date, reflecting investors' concern amid a challenging operating environment, with low, sometimes even negative, rate scenario and global economic slowdown.

Deutsche Bank currently carries a Zacks Rank #3 (Hold). A better-ranked foreign bank includes Grupo Financiero Galicia S.A. (NASDAQ:GGAL) , sporting a Zacks Rank #1 (Strong Buy). The bank has registered a gain of 57.5% year to date on the NYSE.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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