Wednesday

22nd May 2019

Banks to pay out €1.7 billion in rate-fixing scandal

  • Bank vault: Almunia said he is 'appalled' by the scandal (Photo: Burning Robot Factory)

Eight European banks have been fined a total of €1.7 billion after the European Commission found that they had been participating in illegal cartels to fix the multi-trillion euro market of financial derivatives.

The latest rate-fixing scandal, which involved a string of Europe's biggest high street and investment banks including Barclays, RBS, Deutsche Bank and Societe Generale, comes just over a year after a handful of banks were fined for manipulating the inter-bank lending rate that determines interest rates.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

US institutions JP Morgan and Citibank, the Swiss-based UBS, and the brokers RP Martin, were the other institutions involved.

The estimated 2 million derivative contracts across the the world have a combined notional value of €10 trillion worldwide.

Derivative contracts work as an insurance mechanism against volatile interest rate changes and derive their value from financial benchmarks.

However, both Barclays and UBS will avoid paying fines of €2.5 billion and €690 million respectively after helping with the investigation.

EU competition boss Joaquin Almunia said that banks had rigged the Euribor benchmark and had exchanged information on how to fix the market. He added that the fines were the highest amount levied under the EU's anti-trust rules.

The case marks the first time that the EU has imposed fines for market fixing, although national regulators in the US and Britain have already fined banks.

Speaking on Wednesday (4 December), Almunia said that he had been "appalled" by the evidence put together in the investigation, including emails between executives.

"What is shocking… 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," he said.

Four of the banks had formed cartels to rig interest rate derivatives denominated in euros, while a further six institutions had manipulated derivatives denominated in Japanese yen.

But the fines do not bring the case to a close.

Almunia confirmed that the commission was also investigating the possible manipulation of the Swiss franc market.

He added that HSBC, Credit Agricole and JP Morgan - for a separate transgression - and one broker had refused to agree a financial settlement with the EU executive and faced further sanctions.

The Spanish commissioner said that the rate-rigging cases had changed his perception of financial markets.

"Many financial institutions have demonstrated a lot of wrong-doing," he said.

Meanwhile, MEPs and ministers are currently drawing up legislation to regulate the opaque system of creating the financial 'benchmarks' that form the basis of markets.

Brussels to tame 'Wild West' derivatives and short-selling

In the latest part of its endeavour to bring an end to the light-touch regulatory climate that produced the economic crisis, the European Commission has proposed a series of rules intending to shine a light on the until-now murky trading in some of the market's more complicated financial practices: derivatives and short-selling.

Analysis

EU should stop an insane US-Iran war

"If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!", US president Donald Trump tweeted on Monday (20 May).

News in Brief

  1. Poll: Denmark set to double number of liberal MEPs
  2. European brands 'breaking' chemical safety rules
  3. Report: Merkel was lobbied to accept EU top job
  4. May struggling to get Brexit deal passed at fourth vote
  5. German MPs show interest in 'Magnitsky' sanctions
  6. CoE: Rights violations in Hungary 'must be addressed'
  7. EU affairs ministers rubber-stamp new ban on plastics
  8. Private companies campaign to boost turnout in EU poll

Analysis

EU should stop an insane US-Iran war

"If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!", US president Donald Trump tweeted on Monday (20 May).

Magazine

All about the European Parliament elections 2019

EUobserver's new magazine is meant to help readers prepare for the European Parliament elections, no matter their level of knowledge. You can download and read the entire magazine now.

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Join EUobserver

Support quality EU news

Join us