European Commission Settles With Eight Financial Institutions Over Illegal Derivatives Cartel
Tom Burroughes, Group Editor , London , 4 December 2013
The European Commission has reached a settlement with eight banks, imposing a fine totalling €1.71 billion, for creating illegal cartels in financial derivatives, based on inter-bank interest rates.
The [tag|European Commission|]European Commission[/tag] has reached a settlement with eight financial institutions, imposing a fine totalling €1.71 billion ($2.3 billion), for creating illegal cartels in financial derivatives, based on inter-bank interest rates. The fines come on top of other action by regulators to punish banks for rigging market benchmarks such as LIBOR and EURIBOR.
The fines – imposed on six of the firms as two were granted immunity – stem from how they manipulated the way that inter-bank interest rates, and the financial instruments and products that rely on them, were set. The fiddling of the system has rocked confidence in financial markets, adding to the loss of trust associated with the credit market meltdown of 2008 and the associated taxpayer funded bailouts. Several banks in question, such as Royal Bank of Scotland and UBS, had been bailed out by taxpayers.
The EC has acted over cartels in euro interest rate derivatives, or EIRD, and their yen equivalents, or YIRD. On the EIRD side, the banks that have agreed to settle are Barclays, Deutsche Bank, Societe Generale and Royal Bank of Scotland. Barclays, which fully co-operated with regulators from the outset, has immunity and paid no fine. Deutsche has agreed to pay a total of €466 million; SocGen has agreed to pay €445.8 million, and RBS has agreed to pay €131 million. The different fines vary to account for the different durations for taking part in the cartel.
As far as the yen-denominated cartel issue is concerned, the banks are UBS (it paid no fine and was granted immunity); RBS (€260 million); Deutsche Bank (€259.5 million); JP Morgan (€79.9 million); Citigroup (€70 million) and brokerage firm RP Martin (€247 million).