European Union regulators reached a settlement on a penalty with six financial institutions for rate fixing on Wednesday. The companies were fined a total of $2.32 billion (1.71 billion euros) for colluding together to form a cartel to fix benchmark interest rates. Regulators levied penalties against several of the world’s biggest banks, including Deutsche Bank AG (NYSE:DB) (ETR:DBK), Societe Generale SA (OTCMKTS:SCGLY) (EPA:GLE), Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) and JPMorgan Chase & Co. (NYSE:JPM). This is in addition to billions in penalties leveled against financial institutions related to the Libor/Euribor scandal earlier this year.
Additional penalties likely
Based on comments by EU officials, it appears additional penalties, and perhaps even formal antitrust charges against other banks are in the offing. The EU’s competition commissioner, Joaquín Almunia, was quoted on Wednesday as saying the office is pursuing cartel proceedings against several other large financial institutions, including HSBC Holdings plc (LON:HSBA) (NYSE:HSBC) and France’s Credit Agricole SA (OTCMKTS:CRARY) (EPA:ACA). Industry sources say these companies have refused settlement offers to date.
Almunia also castigated all of the parties involved for participating in these “appalling examples of the misconduct” in the financial sector. He continued, “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.”
Fixing Libor rates
The fines are in regard to the Libor rate rigging scandal of late 2006 and 2007. The settlements announced by the European Commission are the initial results from a two-year investigation into conspiracies by major financial institutions to fix the benchmark Japanese Yen Libor and the European benchmark Euribor. The investigation reportedly involves at least 10 global financial institutions.
JPMorgan’s statements along with others
JPMorgan Chase & Co. (NYSE:JPM) released a statement saying that its Yen Libor fine related to “two former traders during a one-month period in early 2007” and that the company planned to “defend itself fully” against any allegations of Euribor-rigging. UK-based HSBC Holdings plc (LON:HSBA) also released a statement saying it planned to defend itself vigorously against the charges that it participated in a cartel to fix interest rates.