5 ms·

For a big bank, that's pocket change.

by coldcode 12y ago

sz4kerto 12y ago
Not exactly, no. This is somewhere between 2 to 4 quarterly profit for DB.
- spuiszis 12y ago
  This reduces their taxable income, so part of it is a benefit to DB so the real number they pay is around ~67% of the headline number. We also have no idea how profitable LIBOR manipulation is over several years. I can imagine incredible lucrative.
  - fitchjo 12y ago
    Actually, at least for the US, fines paid to governmental agencies are generally non-deductible and so DB will take the full brunt of the fine to the bottom line.
    - spuiszis 12y ago
      I agree in theory but in practice, it's not always the full amount but you get things like BofA deducting $12bn pre-tax from their $17bn mortgage settlement[1] or JPMorgan able to deduct a large amount of their $13bn fine[2]. There is always a loophole somewhere. [1]http://www.forbes.com/sites/robertwood/2014/08/21/bofa-grabs-12-billion-tax-write-off-from-17-billion-mortgage-settlement/ http://www.forbes.com/sites/robertwood/2014/08/21/bofa-grabs... [2]http://www.nytimes.com/2015/04/24/business/dealbook/deutsche-bank-settlement-rates.html?ref=dealbook http://www.nytimes.com/2015/04/24/business/dealbook/deutsche... [3]http://www.newsweek.com/2014/11/07/giant-penalties-are-giant-tax-write-offs-wall-street-279993.html http://www.newsweek.com/2014/11/07/giant-penalties-are-giant...
  - cm2187 12y ago
    Not really. My understanding is that there were really two manipulations. One (the most morally reprehensible) happened before the crisis, but affected the rounding of the libor fixings. Pennies to most people but serious money for a few trading desks holding a massive open position on futures. I don't know how much money they made but my guess is that it is a few millions per year per trader. Peanuts for a large bank but big enough to a few individual traders. The second (morally more ambiguous, but with a much larger impact to the market) occurred during the crisis. Basically banks under-estimating their cost of funding published through the Libor fixing contributions in order to not appear having trouble raising money. This may have resulted in reducing their overall funding cost but that was certainly not the motivation (banks typically try not to have a large directional exposure to interest rates, so if Libor goes down, it also means they receive less on their assets). This was really about messaging to the market that they are not in trouble, in a world were runs on the bank were happening pretty much weekly. These fines are an order of magnitude of the gains made on these manipulation. Which is precisely the intention of the regulators.
- moe 12y ago
  And how much did they make from the Libor manipulation?
  - retube 12y ago
    Almost certainly nothing. It's not clear that any attempts to manipulate were successful, or moved the fixing in any non-immaterial way. Furthermore there's no guarantee a successful move would benefit a bank: whilst it might make an individual trader's book money, the bank's net position might be the other way.

For a big bank, that's pocket change.

sz4kerto 12y ago

Not exactly, no. This is somewhere between 2 to 4 quarterly profit for DB.

spuiszis 12y ago
This reduces their taxable income, so part of it is a benefit to DB so the real number they pay is around ~67% of the headline number. We also have no idea how profitable LIBOR manipulation is over several years. I can imagine incredible lucrative.
- fitchjo 12y ago
  Actually, at least for the US, fines paid to governmental agencies are generally non-deductible and so DB will take the full brunt of the fine to the bottom line.
  - spuiszis 12y ago
    I agree in theory but in practice, it's not always the full amount but you get things like BofA deducting $12bn pre-tax from their $17bn mortgage settlement[1] or JPMorgan able to deduct a large amount of their $13bn fine[2]. There is always a loophole somewhere. [1]http://www.forbes.com/sites/robertwood/2014/08/21/bofa-grabs-12-billion-tax-write-off-from-17-billion-mortgage-settlement/ http://www.forbes.com/sites/robertwood/2014/08/21/bofa-grabs... [2]http://www.nytimes.com/2015/04/24/business/dealbook/deutsche-bank-settlement-rates.html?ref=dealbook http://www.nytimes.com/2015/04/24/business/dealbook/deutsche... [3]http://www.newsweek.com/2014/11/07/giant-penalties-are-giant-tax-write-offs-wall-street-279993.html http://www.newsweek.com/2014/11/07/giant-penalties-are-giant...
- cm2187 12y ago
  Not really. My understanding is that there were really two manipulations. One (the most morally reprehensible) happened before the crisis, but affected the rounding of the libor fixings. Pennies to most people but serious money for a few trading desks holding a massive open position on futures. I don't know how much money they made but my guess is that it is a few millions per year per trader. Peanuts for a large bank but big enough to a few individual traders. The second (morally more ambiguous, but with a much larger impact to the market) occurred during the crisis. Basically banks under-estimating their cost of funding published through the Libor fixing contributions in order to not appear having trouble raising money. This may have resulted in reducing their overall funding cost but that was certainly not the motivation (banks typically try not to have a large directional exposure to interest rates, so if Libor goes down, it also means they receive less on their assets). This was really about messaging to the market that they are not in trouble, in a world were runs on the bank were happening pretty much weekly. These fines are an order of magnitude of the gains made on these manipulation. Which is precisely the intention of the regulators.
moe 12y ago
And how much did they make from the Libor manipulation?
- retube 12y ago
  Almost certainly nothing. It's not clear that any attempts to manipulate were successful, or moved the fixing in any non-immaterial way. Furthermore there's no guarantee a successful move would benefit a bank: whilst it might make an individual trader's book money, the bank's net position might be the other way.