Libor scandal grows, German regulator investigating Deutsche Bank

Reuters said that BaFin, a German regulator, is probing possible manipulation of Libor by Deutsche Bank.

BaFin refused to confirm if the bank is involved in their investigation. Findings should start coming as early as this month.

The Libor scandal is spreading fast. Former Barclays CEO, Bob Diamond, testified before parliament on Wednesday. Diamond was forced to resign due to emails showing that the bank rigged Libor downward.

Before Diamond's testimony, Barclay's released an email intimating that the directions to lower Libor was actually coming from high government officials.

The accusations are "mind-blowing" if proven to be true, says Matt Taibbi, a columnist for Rolling Stone.

"This email amazes for a few reasons. One, it suggests that Barclays, which is currently carrying the standard in the LIBOR-manipulation scandal, was actually bringing up the rear — that all of the other banks were in on it, and Barclays only attracted the government's notice because they were last."

High Libor rates suggest that banks are worried about the soundness of each other's business. Lowering Libor keeps markets assured. Libor is also used as a peg for a number of other financial instruments.

Image of The Deutsche Bank Twin Towers in Frankfurt, Germany