European Commission Fines Banks €1.71bn for Participating in Cartels in the Interest Rate Derivatives Industry
The European Commission has fined eight global banks a total of €1,712,468,000 for participating in illegal cartels in markets for financial derivatives covering the European Economic Area (EEA). Four of these institutions participated in a cartel relating to interest rate derivatives denominated in the euro currency. Six of them participated in one or more bilateral cartels relating to interest rate derivatives denominated in Japanese yen. Such collusion between competitors is prohibited by Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement. Both decisions were adopted under the Commission’s cartel settlement procedure, and the companies’ fines were reduced by 10% for agreeing to settle.
Joaquín Almunia, Commission vice president in charge of competition policy, said: “What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other. 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.”
The euro interest rate derivatives (EIRD) cartel operated between September 2005 and May 2008. The settling parties are Barclays, Deutsche Bank, RBS and Société Générale. The cartel aimed at distorting the normal course of pricing components for these derivatives. Traders of different banks discussed their bank’s submissions for the calculation of the EURIBOR as well as their trading and pricing strategies. Barclays was not fined as it benefited from immunity under the Commission’s 2006 Leniency Notice for revealing the existence of the cartel to the Commission. In the context of the same investigation, proceedings were opened against Crédit Agricole, HSBC and JPMorgan and the investigation will continue under the standard (non-settlement) cartel procedure.
In the yen interest rate derivatives (YIRD) sector, the Commission uncovered seven distinct bilateral infringements lasting between one and 10 months in the period from 2007 to 2010. The collusion included discussions between traders of the participating banks on certain JPY LIBOR submissions. The traders involved also exchanged, on occasions, commercially sensitive information relating either to trading positions or to future JPY LIBOR submissions (and in one of the infringements relating to certain future submissions for the Euroyen TIBOR – Tokyo interbank offered rate). The banks involved in one or more of the infringements are UBS, RBS, Deutsche Bank, Citigroup and JPMorgan. The broker RP Martin facilitated one of the infringements by using its contacts with a number of JPY LIBOR panel banks that did not participate in the infringement, with the aim of influencing their JPY LIBOR submissions. UBS received full immunity under the Commission’s 2006 Leniency Notice for revealing to the Commission the existence of the infringements. Citigroup also benefited from full immunity for its participation in one bilateral infringement. In the context of the same investigation, the Commission has also opened proceedings against the cash broker ICAP. This investigation continues under the standard (non-settlement) cartel procedure.