The European Commission said on December 4 that it fined eight international financial groups a total of 1.71 billion euro for participating in cartels to rig the benchmark interbank exchange rates.
The banks participated in cartels “relating to interest rate derivatives” – financial products used to manage interest rate risk fluctuations, the EC said. These products derive their value from the level of a benchmark interest rate, such as the euro interbank offered rate (Euribor), which reflects the cost of interbank lending denominated in euro.
A cartel to rig the Euribor had been in operation between September 2005 and May 2008, with currency traders at different banks discussing their bank’s submissions for the calculation of the Euribor, as well as their trading and pricing strategies.
Four banks – Barclays and RBS in Britain, Deutsche Bank and France’s Société Générale – cooperated with the antitrust enquiry and were handed reduced penalties for agreeing to settle. Barclays got full immunity for revealing the existence of the cartel, dodging a 690 million euro fine. (The bank was fined 290 million pounds sterling by regulators in the UK and US in June for rigging benchmark rates.)
Deutsche Bank was fined 468.9 million euro, Société Générale was fined 445.9 million euro and RBS was fined 131 million euro.
Three other banks – Crédit Agricole, HSBC and JP Morgan – refused to settle and the investigation against them “will continue under the standard (non-settlement) cartel procedure,” the EC said.
In a related investigation, the Commission said that it found “seven distinct bilateral infringements lasting between one and 10 months in the period from 2007 to 2010,” to rig the London interbank offered rate (Libor) on loans denominated in Japanese yen.
These agreements involved five banks, with Switzerland’s UBS involved in five of the agreements. The bank was also the one to blow the whistle on the arrangements, thus receiving full immunity and avoiding a fine of 2.5 billion euro.
The other four banks received reduced penalties for settling – 260.1 million euro for RBS, 259.5 million euro for Deutsche Bank, 79.9 million euro for JP Morgan and 70 million euro for Citibank (which received full immunity for one of the infringements in which it participated and avoided a fine of 55 million euro).
The brokerage firm RP Martin, which facilitated one of the infringements by using its contacts with a number of banks involved in setting the yen Libor (banks that did not participate in the infringement) with the aim of influencing their currency positions, was fined 247 000 euro. Another brokerage firm, Icap, was now also under investigation by the Commission.
The fines are the largest ever levied on the banking sector by the EC, with European competition policy commissioner Joaquín Almunia saying that “the collusion between banks who are supposed to be competing with each other” was “shocking.”
“Today’s decision sends a clear message that the Commission is determined to fight and sanction these cartels in the financial sector. Healthy competition and transparency are crucial for financial markets to work properly, at the service of the real economy rather than the interests of a few,” he said.
(European competition policy commissioner Joaquín Almunia. Photo: EC audiovisual service)