Rate rigging: EU fines three major banks $520m

Rate rigging: EU fines three major banks $520m
Margrethe Vestager, European commissioner for competition.
Updated 07 December 2016

Rate rigging: EU fines three major banks $520m

Rate rigging: EU fines three major banks $520m

BRUSSELS: The EU’s top anti-trust regulator on Wednesday slapped $520 million in fines on three major banks for rigging the Euribor interest rate benchmark used for a wide range of financial instruments.
The sanction by Brussels is the latest example of authorities trying to punish malpractice by the world’s biggest banks in the years running up to the financial crisis in 2008.
HSBC, JP Morgan Chase and Credit Agricole were fined 485 million euros ($520 million) “for participating in a cartel in euro interest rate derivatives,” the European Commission, the EU’s executive arm, said in a statement.
The three banks had held out for a settlement with the EU in 2013 that saw Deutsche Bank, Societe Generale and Royal Bank of Scotland accept responsibility in the case.
“Today’s message sends a clear message: banks and all companies have to respect EU rules,” said the EU’s competition chief Margarethe Vestager at a news briefing.
The Euribor case is one of many involving the business of setting benchmark rates, such as the Libor or the Yen Libor, that are used to price a wide range of loans, including mortgages and student loans.
In recent years, about a dozen of the world’s biggest banks have admitted widespread collusion to manipulate these rates and received huge fines and even jail terms.
Participation in the secret cartel schemes can be very lucrative for banks. The smallest movements of the Euribor rate “can have a huge impact,” Vestager said.
Vestager, a former Danish finance minister, described how traders used online chat rooms to offer rivals special favors in return for help in manipulating the rate.
“And it worked. We found a number of chats between traders congratulating each other and thanking each other for the work well done,” she said, adding that they often used vulgar language.
The case is the first rate manipulation scandal for Credit Agricole and HSBC, while JPMorgan joined EU settlements over Libor rate-rigging.
The highest fine on Wednesday went to US giant JPMorgan Chase with a sanction of 337 million euros.
Credit Agricole, which said it would appeal the decision, was fined 115 million euros, while HSBC was hit with a fine of 33.6 million euros.
JPMorgan Chase denied any wrongdoing, saying in a statement that it would “continue to vigorously defend our position against these allegations.”
The manipulation of rates such as Euribor by young traders has come to symbolize the excesses of the years leading up to financial crisis.

In a case in the UK, four former Barclays bankers were jailed by a court in July for manipulating the Libor interest rate between 2005 and 2007.
In the US, two bankers found guilty of rigging Libor both received jail terms of up to two years.
Some of the traders convicted have come out sharply against authorities for only pursuing junior staff involved in the cases when they said more senior management was implicated.