Deutsche Bank will pay U.S. and British authorities $2.5 billion and its London subsidiary will plead guilty to wire fraud for manipulation of benchmark interest rates, U.S. authorities said on Thursday.
As part of the deal, Germany's largest bank also entered into a deferred prosecution agreement with the U.S. Justice Department and admitted its role in manipulating the London Interbank Offered Rate (Libor).
The penalty follows a seven-year investigation into how banks secretly conspired to rig benchmark interest rates to their benefit.
Libor and related benchmarks are used to set interest rates for trillions of dollars' worth of loans around the world, from mortgages and student loans to credit cards and complex derivatives.
Five other major financial institutions have admitted to misconduct, and 21 traders and brokers have faced criminal charges.
While some employees involved in misconduct have left the company, Deutsche Bank agreed to terminate or ban other employees from the New York banking system, according to New York state's Department of Financial Services.
“Markets do not just manipulate themselves,” Benjamin Lawsky, superintendent of the New York regulatory agency, said in a statement. “It takes deliberate wrongdoing by individuals.”
The $2.5 billion penalty includes $600 million to the New York regulator, $800 million to the U.S. Commodity Futures Trading Commission, $775 million to the U.S. Justice Department and $344 million to the U.K.'s Financial Conduct Authority (FCA), authorities said.
"The fine is so large because Deutsche Bank also misled the regulator, which could have hampered its investigation," the FCA said in a statement, adding that it was a record penalty handed down in Britain for such an offense.