Daily Management Review

European Commission fined three banks nearly half a billion euros


12/07/2016


JPMorgan Chase & Co., HSBC Holdings Plc and Credit Agricole SA have been fined a total of € 485.5 million ($ 521 million) for manipulations with the European Interbank Offered Rate EURIBOR. Prior to this, the EU antitrust regulators carried out a five-year investigation, Bloomberg reported.



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The European Commission said in a statement that the banks colluded and exchanged confidential information in breach of the EU antitrust law. The institutions belonged to a cartel of seven banks, which from September 2005 to May 2008 manipulated the EURIBOR rate.

JPMorgan is obliged to pay a fine of € 337.2 million, HSBC - € 33,6 million, Credit Agricole - € 114,7.

The case relates to specific derivatives, such as interest rates in the euro, for example, EURIBOR. The EC’s investigation concluded that the banks’ traders were "in regular contact" to share information on EURIBOR.

"Investigation of the European Commission came to conclusion that there was a cartel between September 2005 and May 2008. It included seven banks - Barclays, Credit Agricole, HSBC, JPMorgan Chase, Deutsche Bank, RBS and Societe Generale, in different periods of time. The case extended throughout the European economic area, "- said the watchdog in the release.

Initially, the EU’s investigation into manipulation with the EURIBOR rate spread over three years, after JPMorgan, HSBC and Credit Agricole declined to settle the matter with the European Commission, as other members of the cartel did. Deutsche Bank, RBS and Societe Generale have pleaded guilty in December 2013, and Barclays escaped the fine because the bank informed the European Commission about the violations. 

Refusing to settle the case with the Commission, the banks have lost a chance to reduce amount of the fine by 10%.

"Banks are required to comply with rules of EU competition, just as any other companies operating in the single market", - said the European Commissioner for Competition Margrethe Vestager.

Traders of the seven banks regularly communicated with each other through chat rooms or instant messengers. Aim of this cooperation was to change normal order of EURIBOR’s formation.

"This means that seven banks colluded instead of competing with each other in the derivatives market in euro", - said the regulator in the statement. 

EURIBOR is calculated daily on basis of rates in the market of interbank lending and bank statements. The rate is used to calculate cost of credit and various financial products, called derivatives.

After the 2008 crisis, regulators around the world have launched an investigation against banks, accusing them in manipulating interbank lending rates, especially the London LIBOR. A number of banks already have been sentenced to heavy fines for manipulation of interest rates. The case has also blamed several bank employees.

Over the past four years, US and European regulators have fined over 10 banks and brokers for nearly $ 9 billion. The reason was manipulation of the London Interbank Offered Rate (LIBOR) and similar rates. Charges were brought against more than 20 traders. 

source: bloomberg.com






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