The EU Commission implicates major banks in cartel cases, threatens with devastating fines

Joaquín Almunia, Vice-President of the EC in charge of Competition, gave a press conference on Statement of Objections of the EC to Crédit Agricole, HSBC and JPMorgan for suspected participation in euro interest rate derivatives cartel. (EC Audiovisual Services, 20/05/2014).

Joaquín Almunia, Vice-President of the EC in charge of Competition, gave a press conference on Statement of Objections of the EC to Crédit Agricole, HSBC and JPMorgan for suspected participation in euro interest rate derivatives cartel. (EC Audiovisual Services, 20/05/2014).

Three major international banking firms Crédit Agricole, HSBC and JPMorgan Chase came yesterday again under the watchful eye of the European Commission, for their role in financial sector cartels (interest rates and derivatives denominated in euro). It’s about financial products based on the Euribor (euro interbank offered rate), an interest rate benchmark. This interest rate affects almost all loans concluded in euro. Let’s follow the story from the beginning.

Eight banks accepted the accusations

Last December the European Commission fined 8 other international financial firms a total of € 1 712 468 000 for participating in illegal cartels in markets for financial derivatives. The Commission explains that “Interest rate derivatives (e.g. forward rate agreements, swaps, futures, options) are financial products which are used by banks or companies for managing the risk of interest rate fluctuations. These products are traded worldwide and play a key role in the global economy”.

The value of the derivatives is (derived) based on the level of a benchmark interest rate, such as the London interbank offered rate (LIBOR) – which is used for various currencies including the Japanese yen (JPY) or the Euro Interbank Offered Rate (Eurbor), for the euro. They can affect the interest rate cost of a major investment project or a house mortgage even a loan for a car. In this way they weight on the everyday lives of every consumer all around the world.

Raising interest rates artificially

Four of these eight institutions were caught participating in a cartel relating to interest rate derivatives denominated in the euro currency (Barclays, Deutsche Bank, Société Générale, Royal Bank of Scotland). In this case, Barclays received full immunity for revealing the existence of the cartel and thereby avoided a fine of around € 690 million for its participation in the infringement.

Another six large international banks participated in one or more bilateral cartels relating to interest rate derivatives denominated in Japanese yen (UBS, RBS, Deutsche Bank, JPMorgan, Citigroup and RP Martin). In December 2013 UBS received full immunity for revealing the existence of the yen cartels and in this way avoided a fine of around € 2.5bn for its participation in five of the seven infringements. Citigroup received full immunity for one of the infringements in which it participated, thereby avoiding a fine of around € 55 million.

Affecting all consumers

Such collision between competitors is prohibited by Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement. Both decisions were adopted under the Commission’s cartel settlement procedure; the companies’ fines were reduced by 10% for agreeing to settle.

Last December, the EU Commission had also accused the three above mentioned banks (Crédit Agricole, HSBC and JPMorgan Chase) for having participated in these infringements of the anti-trust laws. However, the three didn’t settle with the EU authorities and refused any wrongdoing. Understandably, they thought that they could hide the traces of their questionable transactions which could betray their participation in the cartels, beyond the reach of the Commission services.

It seems that now the EU authorities have dug out evidence for the participation of the three banks in interest rates setting and derivative pricing rigging. The relevant Commission Press lease states that, “Since that time (December 2013), we have continued our investigation under the standard cartel procedure for the three parties that did not settle with the Commission – namely Crédit Agricole, HSBC and JPMorgan Chase”. If the Commission was unable to come up with hard evidence implicating the three banks, Joaquín Almunia, the Commission’ Vice-President in charge of competition policy, would have avoided to send them the ‘Statement of Objections’, thus initiating their indictment.

Fines of up to 10% of turnover

According to the standard legal procedures, after the accused parties have exercised their rights of defense (examine the documents in the Commission’s investigation file, reply in writing and request an oral hearing) and the Commission insists that there is sufficient evidence of an infringement, it can issue a decision prohibiting the unlawful conduct and impose a fine of up to 10% of a company’s annual worldwide turnover.

In the event that those three banks still deny settling their case with the Commission, the fine can reach the maximum. A forfeit of 10% on their worldwide turnover could be devastating for the three financial firms.

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

This is how we can empower 8 billion minds by 2030

Why financial services can kickstart Africa’s digital economy

Chart of the day: The internet has a language diversity problem

With potential to boost profits by up to 20 per cent, a woman’s place is at work, says UN labour agency

The world wide web is 30. Here are 8 things you should know about it

Yemen: Security Council backs new mission in support of key port city truce

EU budget: Commission proposes major funding increase for stronger borders and migration

How Britain’s backyard bird feeders are shaping evolution

Back to the future: flying cars are becoming a reality

Dignified and non-discriminatory heath care: does anyone even know what it means?

In Tanzania, UN refugee chief praises ‘regional peacemaker’ role, and efforts to welcome neighbours on the run

Further reforms will promote a stronger and more inclusive Hungarian economy

Antitrust: Commission fines Google €4.34 billion for illegal practices regarding Android mobile devices to strengthen dominance of Google’s search engine

The European Commission and EU consumer authorities publish final assessment of dialogue with Volkswagen

UN News 2018 Recap: In Case You Missed It

This is why attractive cities do better economically

COVID19 Pandemic: The Mental Health of Colored Chicks

New Erasmus: more opportunities for disadvantaged youth

Six children among 53 confirmed fatalities after Libya detention centre airstrikes: Security Council condemns attack

Sustainable fishing staying afloat in developed world, sinking in poorer regions

‘We are facing a learning crisis’, UN chief warns on International Youth Day

EU growth in 2015 to be again sluggish; Can the Juncker Commission fight this out?

Why Microsoft is a regular to Almunia’s

Why the world needs systems leadership, not selfish leadership

Migration crisis update: The “Habsburg Empire” comes back to life while EU loses control

The price of centralization of human resources for health

“Working together to make a change at the COP 21 in Paris”, an article by Ambassador Yang of the Chinese Mission to EU

Germany is the world’s most innovative economy

OECD household income up 0.7% in first quarter of 2018, outpacing GDP growth

Technology is a force for peace and prosperity. Don’t let its challenges obscure this

A Sting Exclusive: “Digital and mobile technologies are helping to achieve an economic success in Spain”, the Spanish Secretary of State for Telecommunications and Information Society Víctor Calvo-Sotelo reveals to the Sting at Mobile World Congress 2015

The Brexit factor in the US-China trade war and other conflicts

Hungary’s emergency measures: MEPs ask EU to impose sanctions and stop payments

A Sting Exclusive: “There can be no global deal on emissions without China and the USA”, Conservative MEP Ian Duncan stresses from Brussels

Turning challenge into opportunity on the course to becoming the first climate-neutral continent

Coronavirus: EU guidance for a safe return to the workplace

Doctors are humans too: the benefits of embracing your mental status

Trade is not a weapon. Let’s not use it as one

The staggering loss of the Arctic Ocean’s oldest sea ice shown in time-lapse

Coronavirus vs flu: how do they compare?

Climate change recognized as ‘threat multiplier’, UN Security Council debates its impact on peace

Ebola outbreak in DR Congo declared over, now let’s tackle other health challenges: WHO chief

Asylum: deal to update EU fingerprinting database

Relieving the suffering of dying: Home Palliative Care as a spiritual coping strategy

IMF: The near-term outlook for the U.S. economy is one of strong growth and job creation

MWC 2016 Live: Industrial world prepares to reap digital benefits

EU continues targeting on Chinese steel imports instead of the revival of its own economy

What the global Internet’s stakeholders can learn from Europe’s new data law

EU to finance new investment projects with extra borrowing; French and Italian deficits to be tolerated

IMF’s Lagarde: Estimating Cyber Risk for the Financial Sector

Reading this alone? Recent surveys reveal the curious truth about loneliness

UN chief announces progress on committee to shape Syria’s political future

These are the countries where it’s still illegal to get an abortion

Remembering slave trade offers chance to raise awareness, ‘oppose all forms of modern slavery’ – UNESCO

Immigrant integration policies have improved but challenges remain

Scientists now think air pollution is fuelling violent crime

A new world that demands new doctors in the fourth industrial revolution

Is there a chance for the West to win the war on terror?

Mainland Europe adopts Germanic cartel business patterns

Nicaragua crisis: One year in, more than 60,000 have fled, seeking refuge

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s