Two US banks are among eight financial institutions that have settled with European regulators for creating an illegal cartel in financial derivatives.

Two US banks - Citigroup and JP Morgan - are among eight financial institutions that have reached a settlement with the European Commission for setting up an illegal cartel in financial derivatives, based on inter-bank interest rates. The fines are on top of other actions by regulators to punish banks and others for rigging market benchmarks such as LIBOR and EURIBOR.

The fines – imposed on six of the institutions 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 ($633 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 institutions 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 RP Martin (€247 million). (That firm is a brokerage business.)