Competition authorities in Brussels have slapped a record fine of 1.7 billion euros on six banks for manipulating Libor interest rates. But financial expert Sven Giegold doubts the banks have learned a lesson.
Deutsche Welle: Deutsche Bank alone has to pay 725 million euros for its involvement in cartels that colluded to manipulate interest rates such as the Libor, the rate banks charge each other for loans. How much do the fines actually hurt banks?
Sven Giegold: The banks were prepared. These aren’t the only cases. There are similar investigations and fines by other regulators, for example in the US. Deutsche Bank recently stepped up its reservesto 4 billion euros to resolve legal cases.
But Deutsche Bank has total assets worth 2 trillion euros.
You mustn't confuse total assets with what the banks are earning. They don't own those assets. Deutsche Bank, for example, has roughly 40 billion euros in earnings - and 4 billion out of that is already one tenth. So the bank is affected.
You met one of Deutsche bank's CEOs, Jürgen Fitschen, on Wednesday at a German panel debate organized by the German Banking Association just after the Commission had issued the fines. Did he seem upset? Did you have the feeling he had any regrets?
Guilt is actually not one of Jürgen Fitschen's strengths.
It was very peculiar timing for a debate called "Unease towards capitalism – banks under criticism?"
I also pointed out jokingly how coincidental it was for the banking association to organize an event it said would critically debate capitalism but only had supporters of capitalism on the panel – with the exception of me and a bishop.
Deutsche Bank management banned online chats with employees of other institutes even before the scandal was made public. Fitschen and Anshu Jain, the other CEO, said they're planning to change employees' attitudes so that this kind of wrongdoing won't happen in the future. Do you think they'll be successful?
Banks have to be able to take risks, and we don't want to keep them from doing that. But they need to do so under strict conditions. Employees are currently encouraged to adopt risky behavior because of the premiums they receive.
That's a good question. The problem is the laws are not yet in place. We have to be much more stringent when it comes to economic crimes.
Bankers work in an environment where it's not cool to alert wrongdoings to regulators or to the European Commission. Do you think there are enough incentives to actually encourage whistleblowing within banks if, for instance, collusion is happening?.
I think that’s asking a bit much. It will never be cool anywhere to raise concern to regulators. But at least society views the whistleblowers positively and honors their work. There should be a legal framework that prevents employers from putting whistleblowers at a disadvantage. That's foreseen, also because of amendments by the Greens to the European law against market manipulation. Now it has to be transformed into national law.
Speaking of transforming something into national law, the European Commission has announced plans to put the calculation of Libor and similar interest rates under tighter regulation. That's a long process, isn't it?
It's a regulation and not a directive, so it will be directly applicable once it's decided. But it hasn’t yet been decided, neither by the member states nor by the European Parliament. Unfortunately, the control over these indices remains with the national supervisors; it will not be taken over by the European regulator ESMA. That, from our perspective, would have been better because there is an obvious problem with national regulators being too close to the banks they're supposed to supervise.
Work on banking regulation has been stalled for a while because the German government wasn't fully operational. A lot of questions are still open - for example, who pulls the plug if you see a bank is failing?
True, there are many open questions, such as how to enforce liability and ensure that taxpayers don’t have to bail out banks again. These rules are being negotiated. There are lots of players who would like to see bank bailouts still possible even after the crisis is over. That's very unfortunate. We have to make sure that in the future, it's actually the creditors of banks and not the taxpayers who have to take the risk if a bank fails.
Sven Giegold is the finance spokesperson for the Green Party in the European Parliament. He is also a founding member of Attac Germany.