European Commission Fines 6 Firms Over Rigging

February 24, 2014

In December, the European Commission levied record fines on five banks and one U.K.-broker for rate rigging following statements in June 2013 that those involved in the market abuse would be subject to penalties.

According to press reports, Deutsche Bank, RBS, J.P. Morgan, Societe Generale, Citigroup and U.K.-based broker RP Martin were hit with fines totaling €1.7 billion for their involvement in the rate-rigging scandal that broke last year.

The fines were levied following a two-year investigation into the scandal, in which all six financial institutions admitting to being part of a cartel. This involved the manipulation of the two global benchmarks, the London Interbank Offered Rate (Libor) and the Europe Interbank Offered Rate (Euribor).

All six agreed to pay fines, with Deutsche Bank receiving the highest charge—€725 million—after admitting to being involved in both the Libor- and Euribor-rigging cartels. The Royal Bank of Scotland also admitted its activity in both, receiving a fine of €391 million.

Societe Generate will pay €466 million for its involvement in the Euribor benchmark, while J.P. Morgan and Citigroup will pay €79.8 million and €70 million, respectively, for their abuse of Libor. RP Martin was fined €247,000 for facilitating the Libor-rigging cartel.

However, not all banks allegedly involved in the practice settled with the EU. Credit Agricole and HSBC declined to resolve with the EU and disputed the allegations.

UBS and Barclays also avoided these fines for being the first to alert the authorities to the activity.

Total fines are now almost €4.3 billion ($5.8 billion), with UBS, RBS, Barclays, Rabobank and Icap all previously fined for the practice.

In October, the EC unveiled draft legislation proposing that Libor and other financial benchmarks will be regulated by the European Union.

Under the suggested rules, national regulators and a coordinating European body will be allowed to investigate and monitor any possible rigging of indexes or conflicts of interest. It will also be given the power to issue fines.

 

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