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FRANKFURT (Reuters) - German markets watchdog Bafin is set to tell Deutsche Bank <DBKGn.DE> of "organisational flaws" in how it supervised its contribution to the setting of inter-bank lending rates at the heart of the international rate-rigging scandal, sources familiar with the watchdog's investigation said.
Bafin, which has been investigating Deutsche Bank's involvement in setting the London Inter-Bank Offered Rate, or Libor, is primarily seeking to get the shortcomings corrected, one of the sources said.
Banks are usually quick to correct errors in their systems, even before regulators ask them to do so, the person said.
Bafin and other regulators have been investigating whether banks sought to manipulate Libor and its euro zone counterpart, Euribor, a key measure of how much banks pay to borrow from eachother which is used as the basis for setting lending rates on a wide range of financial products from mortgages to complex derivatives.
While Bafin itself cannot impose fines, its report is expected to feed into settlement talks between Deutsche and regulators in the United States and the UK.
Deutsche has already made provisions for possible fines in the Libor case, sources close to the lender have told Reuters previously.
Swiss bank UBS <UBSN.VX> and Britain's Barclays <BARC.L> have already paid a total of nearly $2 billion (1.3 billion pounds) to settle rate manipulation allegations, while Royal Bank of Scotland <RBS.L> has been fined $612 million.
German financial daily Handelsblatt also reported on Thursday that Bafin was homing in on organisational issues at Deutsche.
The regulator's findings would not hold co-chief executives Anshu Jain and Juergen Fitschen to be at fault and there would be no consequences for other current or former board members at Germany's flagship lender, the paper said, citing "insiders."
Reuters reported in February that Deutsche Bank's top leaders were unlikely to be sacked as a result of the investigations, citing three people with knowledge of the matter.
Bafin said this week that its preliminary findings would be passed on to Berlin by the end of March.
"The investigation is not yet completed," a Bafin spokeswoman said on Thursday.
Deutsche Bank declined to comment and Jain did not mention the probe in a presentation to investors in London but instead spoke of a good start to the year.
"We expect our first quarter to be solid across all businesses, driven by robust revenues similar to last year's performance," Jain said, adding that he expected last year's cost reduction efforts would also help cut expenses in the first quarter.
Deutsche's shares were up 1.2 percent at 32.84 euros by 12:28 p.m. British time, when the main German DAX index <.GDAXI> was down 0.8 percent.
Bafin's president Elke Koenig told Reuters in February that a key question for officials was whether banks reacted quickly enough once the Libor problems became known, and whether they reached the right conclusions.
Thomson Reuters, parent company of Reuters, has been calculating and distributing Libor rates for Libor's sponsor, the British Bankers' Association, since 2005.
(Reporting By Edward Taylor, Alexander Huebner, Philipp Halstrick, Jonathan Gould and Arno Schuetze; Editing by Greg Mahlich)