The Dutch firm Rabobank has agreed to pay more than $1 billion in criminal and civil penalties to settle investigations by US, UK and other regulatory authorities into its role in manipulating global benchmark interest rates. Rabobank’s chief executive stepped down immediately after the announcement.

The Dutch firm [tag|Rabobank|]Rabobank[/tag] has agreed to pay more than $1 billion in criminal and civil penalties to settle investigations by US, UK and other regulatory authorities into its role in manipulating global benchmark interest rates. Rabobank’s chief executive stepped down immediately after the announcement.

The bank is the fifth financial firm to settle accusations that its employees manipulated the [tag|LIBOR|]London Interbank Offered Rate[/tag] and the Euro Interbank Offered Rate. The settlement with Rabobank is the second largest agreement after the $1.5 billion penalty imposed on UBS related to the manipulation of benchmark rates, which help determine the borrowing costs for trillions of dollars of mortgages, business loans, credit cards and other financial products.

As part of the settlement, Rabobank will avoid criminal charges as long as it continues to cooperate with investigators. The firm will pay a $325 million criminal penalty to the US Justice Department and $475 million to the Commodity Futures Trading Commission, as well as $170 million to the UK’s Financial Conduct Authority and about $96 million to the Dutch authorities.

To set the LIBOR and [tag|EURIBOR|]EURIBOR[/tag] rates, banks submit the rates at which they could borrow money, on an unsecured basis, in various currencies and varying maturities. Those rates are averaged, after the highest and lowest ones are eliminated, and that becomes that day’s rate. According to US authorities, derivatives swaps traders at Rabobank and other banks requested that Rabobank employees make rate submissions that would benefit their trading positions.

“Such accommodations were a regular part of the rate-setting process at Rabobank,” said the Justice Department.

Rabobank also ignored a conflict of interest created by assigning traders with positions tied to the benchmark rates to serve as the submitters of rates used to calculate LIBOR, added the [tag|CFTC|]CFTC[/tag].

“This conflict was exacerbated by traders and submitters sitting together so that traders could simply shout requests for unlawful submissions across the trading desk,” said the financial watchdog.

In light of the findings in the LIBOR and EURIBOR investigation, Piet Moerland, the chairman of Rabobank’s executive board and its chief executive, resigned immediately, said a Reuters report.

“I fully understand and share the sense of indignation that the findings of the Libor and Euribor investigations will cause,” Moerland said in a statement.

“I wish to send a strong message on behalf of the bank and on behalf of the executive board: We sincerely apologize for, and strongly condemn, this inappropriate behavior.”

Rinus Minderhoud, a banker and member of Rabobank’s supervisory board, will succeed Moerland as chairman of its executive board.

According to the CFTC statement, more than two dozen traders were involved in the inappropriate conduct. No Rabobank employees have been charged criminally, although the investigation is continuing, the regulator said.

With the Rabobank fine, the LIBOR case is far from over for UK and US regulators. Financial heavy-hitters like Deutsche Bank and Citigroup are still under investigation, just as The Royal Bank of Scotland and ICAP, an interdealer broker based in London, are expected to settle on charges in the coming weeks.

“The sheer number of institutions and individuals involved in these cases reflects a truly shocking and brazen degree of unlawfulness, warranting the historic enforcement response we bring forth today and in our prior cases,” said David Meister, director of enforcement for the CFTC.