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EU Regulator Levies Record Cartel Fines On Six Banks Guilty of Rigging Euribor, Libor

Friday, December 6, 2013
By Joe Kirwin

Dec. 4 --The European Union antitrust authority, in record fines for an illegal cartel, hit six European and U.S.-based investment banks, including Citigroup Inc. and JPMorgan Chase & Co., as well as one broker, with $2.32 billion worth of financial penalties for rigging Euribor and Libor inter-bank lending interest rates for derivatives.

All of the financial institutions fined confessed to their illegal activities. Meanwhile, the European Commission said its investigation into the illegal cartels will continue regarding banks that have not cooperated in the probe of either the Euribor or the Yen Libor rate rigging.

Deutsche Bank AG, Germany’s largest investment bank, received the largest fine at $978 million followed by Royal Bank of Scotland Group PLC with a penalty of $527 million. Both banks confessed to participating in cartels involving Euribor and Yen Libor.

Whistle-Blowers Dodge Huge Fines
Switzerland-based UBS AG and U.K.-based Barclays PLC, which had previously been fined by U.S. and U.K. authorities for Libor rigging, would have received the largest fines but were exempted for being the first whistle-blowers in the two cartels.

U.S.-based Citigroup was fined $94.5 million for participating in the Yen Libor cartel that took place from 2007 to 2010, while U.S-based JPMorgan Chase was hit with a $107 million penalty for also colluding in the Yen Libor price rigging.

The other bank fined was France-based Societe Generale SA ($601 million) for participating in the Euribor cartel, which ran from 2005 to 2008. The broker RP Martin Holding Ltd. was fined $377,000 for “facilitating” the Yen Libor cartel, the European Commission said.

'Shocking' Collusion
“What is shocking about Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators, but also the collusion between banks who are supposed to be competing with each other,” said European Competition Commissioner Joaquin Almunia at a press conference when he announced the fines.
The Commission said UBS would have been fined $3.3 billion had it not been the first to blow the whistle on the Yen Libor cartel.

 

The Commission said UBS would have been fined $3.3 billion had it not been the first to blow the whistle on the Yen Libor cartel. Barclays avoided a fine of $931 million by blowing the whistle on the Euribor cartel. All the other banks fined Dec. 4 benefited from the Commission’s 2006 Leniency Notice and received a reduction in their fines for cooperating after UBS and Barclays blew the whistle.

Almunia defended the EU rules that allowed UBS and Barclays to gain full immunity for being the first to blow the whistle and the others to get a reduction.

“The immunity and leniency rules proved extremely helpful in this investigation and to bring parts of it to a rapid conclusion,” said Almunia. He added that he accepted criticism from some experts that the fines were too low. The amount of the fines were calculated on the duration and the number of infringements of each financial institution.

The EU antitrust chief also made it clear that he expects further penalties as the investigation continues into the banks that did not confess to participating in either the Euribor or the Yen Libor cartel. These include JPMorgan Chase, which is contesting its alleged collusion in the Euribor cartel. HSBC Holding PLC and Credit Agricole SA are also contesting their alleged collusion in the Euribor cartel. The broker ICAP PLC is being investigated in the Yen Libor probe.

Almunia added that many of the banks fined or under investigation for Libor and Euribor rigging are also being probed for financial benchmark manipulation including currency trading.

“This will not be the end,” said Almunia said of the fines issued Dec. 4.

Banks Say They Have Changed
Deutsche Bank issued a Dec. 4 statement saying its participation in the Euribor and Yen Libor cartels was a “legacy” issue.

“The settlement relates to past practices of individuals that were in gross violation of Deutsche Bank’s values and beliefs,” Jurgen Fitschen and Anshu Jain, the co-chief executive officers of Deutsche Bank said in the statement. The company added that it had set up an “independent Benchmark Submission Oversight” function that now oversees the bank’s interbank offered rates submissions and reports to the risk management division of the bank.

Royal Bank of Scotland, which needed a government bailout in 2008 to prevent a collapse, also said it had put in place measures to prevent the kind of illegal behavior by its employees exposed by the Commission investigation.

“We acknowledged back in February that there were serious shortcomings in our systems and controls on this issue but also in the integrity of a very small number of our employees,” said Royal Bank of Scotland CEO Philip Hampton in a Dec. 4 statement. “Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue.”

JPMorgan Chase insisted in a statement that its participation in the Yen Libor scandal was the result of “two former traders” during a one-month period in the early part of 2007. The company also refuted any guilt in the Euribor cartel and said it intends to “defend itself” in the ongoing Commission investigation.

Meanwhile Almunia expressed confidence that the remaining part of the Euribor and Yen Libor probe would conclude soon and that the commission investigation now has the benefit of documents and other information obtained from banks and brokers that have cooperated.

“The companies still under investigation have not recognized wrongdoing,” Almunia said. “But we have documents and other information from the companies that have cooperated.”

To contact the reporter on this story: Joe Kirwin in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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