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Deutsche to pay $220 million to settle LIBOR manipulation claims

Deutsche Bank will pay $220 million to settle claims by 45 states that the bank manipulated interest rates linked to the U.S. dollar London interbank offered rate, according to settlement documents.

The settlement, announced Wednesday, will set aside $213.4 million to be distributed to investors that had LIBOR-linked swaps and other investment contracts with Deutsche Bank from 2005 to 2010, the period under investigation, according to the documents. The remainder of the settlement will be used to pay for the states' investigation costs.

The states' investigation showed that Deutsche Bank defrauded its counterparties by making false or misleading LIBOR submissions to other banks to influence their banks' interest rate determinations, thus benefiting Deutsche Bank's trading positions, the documents said.

Also, Deutsche Bank was aware that other banks were manipulating their LIBOR, according to the settlement. Deutsche Bank was among a panel of 16 banks that made U.S. dollar LIBOR submissions to establish a daily LIBOR rate, and because of the manipulation, the overall LIBOR rate from 2005 to 2010 was a "false rate," New York Attorney General Eric Schneiderman said in a news release Wednesday. New York was one of the 45 states involved in the investigation and settlement.

The Deutsche Bank agreement is the second multistate settlement involving U.S. dollar LIBOR manipulation. In August 2016, Barclays agreed to a $100 million in a settlement with 43 states, including New York, over charges that its Barclays Capital investment bank subsidiary manipulated benchmark interest rates.

The complete settlement is on the New York attorney general's website.

"This settlement resolves the bank's final pending U.S. regulatory inquiry related to LIBOR," a Deutsche Bank spokesman said.