Brussels accuses Deutsche Bank and Rabobank of manipulating debt markets during the euro crisis and the bailout of Spain, Portugal, Ireland, Greece and Cyprus.
Brussels accuses Deutsche Bank and Rabobank of manipulating debt markets during the euro crisis and the bailout of Spain, Portugal, Ireland, Greece and Cyprus.
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Deutsche Bank, the first German bank and one of the largest in Europe, manipulated the debt markets in the company of a Dutch entity, Rabobank, between 2005 and 2016. The European Commission has reached the “preliminary” conclusion that both banks “infringed EU antitrust rules […] to distort competition in the trading of euro-denominated securities” during the worst years of the financial crisis, when Greece, Ireland, Portugal, Spain and Cyprus had to ask for bailouts because the sovereign bond markets, on which the investigation is focused, were closed to them and only lent them money in exchange for unaffordable prices, i.e. at sky-high interest rates.
Right in the middle years in which this investigation has found collusion and manipulation of the bond market, the debt crisis broke out in Europe. The discovery at the beginning of 2010 that Greece, with the help of Goldman Sachs, had made up its public accounts opened the door to attacks on Greek bonds in the markets. Athens ended up asking for a bailout (in the end there were three), but this did not prevent contagion to other countries, and almost took the euro by storm. In the meantime, “the two banks, through some of their traders, exchanged sensitive trading information and coordinated their strategies when trading these bonds in the secondary market,” the Commission accuses.
The secondary market for public debt is where the risk premium is fixed, that financial benchmark which in those years became a nightmare for States in trouble and, above all, for their citizens. Five of them, including Spain, had to ask for financial assistance from their partners in order to meet their obligations.
In exchange for this assistance, these countries undertook to make cuts and structural reforms, which in many cases also translated into cuts in rights. Among the European governments that stood out most in demanding these cuts and reforms was Angela Merkel’s German government, through its then powerful finance minister, Wolfgang Schäuble, who later became president of the German parliament. Years later, the former President of the European Commission and Prime Minister of Luxembourg during the years of the crisis, Luxembourg’s Jean-Claude Juncker, came to apologize to Greece, the country that suffered the most from those conditions: “We did not show solidarity with Greece, we insulted it,” he declared in 2019 in Parliament.
“The bonds covered by this investigation are all denominated in euros,” specifies the communiqué of the Commission’s Competition department, which is in charge of the inquiries. It goes on to state that these are “sovereign bonds issued by the central governments of euro zone member states”, it also lists other types of debt securities such as government agency bonds, bonds insured by credit institutions or bonds covered by national authorities. It even points to a type of government-guaranteed debt issued “in response to the 2008 crisis and for a limited period of time”.
Rabobank has indicated, according to Reuters, that it is cooperating with the competition authorities. Deutsche Bank, for its part, has stated that it “does not expect a financial penalty” because it “has cooperated proactively […] and as a result is granted conditional immunity”.
This is not the first investigation into Deutsche Bank and Rabobank for suspicions that they have broken market rules. In fact, the recent history of the German entity is dotted with cases of this type that tarnish its reputation. In Mexico, for example, it already faced a sanction along with other international banks for a similar action with the country’s debt bonds between 2010 and 2013. Although most of the investigations in which Deutsche Bank has been involved deal with the non-existence of filters to avoid money laundering. In April, German police searched the offices of the bank’s Frankfurt headquarters after suspicious activity related to money laundering was detected. Earlier in 2019, it agreed to pay a $15 million fine to the German judiciary to close another investigation into allegedly helping clients set up companies in tax havens.
Deutsche Bank, which went through a crisis in 2019 that brought it to the edge of bankruptcy – it had to launch a savings plan that eliminated 18,000 jobs and its investment banking – has also been involved in the scandal of manipulation of the libor index (the London interbank market). The case ended with multimillion-dollar sanctions against a handful of banks for making secret pacts to alter interest rates to their benefit, among them the German entity, which paid 2.5 billion dollars in 2015. In addition, it was also part of the group that skirted international regulations and benefited from the favorable treatment they offered to questionable Eastern European tycoons, criminal networks and political operators accused of corruption. And it even had to pay 150 million dollars for “significant failures” in the supervision of the accounts of Jeffrey Epstein – US financier accused of sex trafficking of minors and who committed suicide in prison in 2019.
Rabobank has also been involved in scandals that have cost it a fine or two. Its US subsidiary was sanctioned with 370 million dollars in 2018 for obstructing money laundering investigations being developed by US regulators. Those assets would be, by the bank’s own admission when pleading guilty, linked to Mexican drug traffickers.
From now on, the period for the investigated entities to present their allegations in writing and orally is open. If, despite this, the EU antitrust authorities find Deutsche Bank and Rabobank guilty, something for which there is no established deadline, both banks could face fines of up to 10% of their worldwide turnover. In the case of the German bank, this amounted to 25.4 billion in 2021; in the case of the Dutch bank, to 12.169 billion.
Deutsche Bank and Rabobank should:
1. Return all extra money collected with interest.
2. Pay the highest fine possible under UE and those countries law.
3. Be forced to sell their subsidiaries in the countries where they manipulated the market at fire sale prices.
That’s hostile and unfriendly. Those are the same they started calling southern Europe “the PIGS” too.
Good thing our friends are the German people and not their banks otherwise…
> “the two banks, through some of their traders, exchanged sensitive trading information and coordinated their strategies when trading these bonds in the secondary market,” the Commission accuses.
I hope they get punished for that. This is morally wrong and probably highly illegal.
> Deutsche Bank, for its part, has stated that it “does not expect a financial penalty” because it “has cooperated proactively […] and as a result is granted conditional immunity”.
Oh.
Deutsche Bank is a very very bad organization. They operate like a criminal conglomerate. Bribery, coruption, tax evasion, espionage, murder. The thing is if they wouldn’t be doing what they doing somebody else would be doing it.
to big to exist i would say. this is too much power for a single, unchecked entity to have. and according to the news they have the audacity to claim there is no need for punishment. we are talking about fucking the lives of 73 million citizens. there must be justice.