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

Advertising

Advertising

Advertising

Advertising

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

US pardons for accused war criminals, contrary to international law: UN rights office

EU Border and Coast Guard: new corps of 10 000 border and coast guards by 2027

It’s Trump’s anti-globalization and inward-looking rhetoric that perturbs GOP and US

Cape Town’s crisis shows us the real cost of water

EU elections update: Can the EU voters vote unaffected from fake news and online disinformation?

Combatting terrorism: EP special committee calls for closer EU cooperation

Austrian Presidency priorities discussed in committees

New European frontiers for renewable energy development

MWC 2016 Live: Industrial world prepares to reap digital benefits

EU Summit/Migration: Parliament calls for joint solutions based on solidarity

AIESEC @ European Business Summit 2015: The power of an individual and how we can awaken Europe’s Youth

These countries have the best work-life balance

EU finally agrees on target for 40% greenhouse emission cuts ahead of Paris climate talks

The role companies play in boosting growth in emerging markets

UN chief encourages victims of terrorism to ‘raise up their voices’

Resiliency is the key to strong investments in a chaotic world

One third of poorer countries face both undernutrition and obesity: WHO report

OECD warns global economy remains weak as subdued trade drags down growth

UN welcomes ‘most comprehensive agreement ever’ on global health

Brexit: the time has come for the UK to clarify its position

Business models inspired by nature are the future

Electronic or conventional cigarettes – which is safer?

Visiting North Korea, UN relief chief spotlights funding shortfall to meet humanitarian needs

Libya: Heavy shelling and civilian deaths ‘blatant violation’ of international law – UN envoy

The EU tells the bare truth to the UK that there is no such thing as easy divorces

Global Citizen-Volunteer Internships

COP21 Breaking News_08 December: Global Business Community Comes to Paris with Solutions for Taking On the Climate Challenge Across the Board

Why medical students decide to study abroad?

How Britain’s backyard bird feeders are shaping evolution

Germany to help China in trade disputes with Brussels

Thursday’s Daily Brief: Women in peacekeeping, the arrest of Sudan’s leader, updates on Libya, Nigeria and Syria

Women must have an equal share in politics, say MEPs and national MPs

Ebola fight ongoing amid evidence of ‘several massacres’ in DR Congo’s Ituri province

What the future of trust looks like

MEPs demand an end to migrant deaths across the Mediterranean Sea

Banks launch green charter to help shipping reduce its carbon footprint

Climate emergency: City mayors are ‘world’s first responders’, says UN chief

Why home is the least safe place to be a woman

104 countries have laws that prevent women from working in some jobs

3 reasons why business leaders can’t afford to ignore diversity

First 17 “European Universities” selected: a major step towards building a European Education Area

The Catcher in the Rice

Joint EU-U.S. statement following the EU-U.S. Justice and Home Affairs Ministerial Meeting

US-EU trade war: Berlin fearful of the second round

The secret weapon in the fight for sustainability? The humble barcode

UN, global health agencies sound alarm on drug-resistant infections; new recommendations to reduce ‘staggering number’ of future deaths

Malaysia has achieved high levels of growth, but must do more to address governance and social challenges

From cheeseburgers to coral reefs, the science of decision-making can change the world

European Business Summit 2014 : The Sting Report, Day II – Business, Politics and EBS 2015

The number of internally displaced people is at a record high. Here’s why

Look Mom, even the House of Lords says the #righttobeforgotten is not right

Checks, fines, crisis reserve: MEPs vote on EU farm policy reform

We should look to nature for solutions to the global water crisis. Here’s why

World’s human rights watchdog spotlights Afghanistan, Yemen and 12 others: Here’s the scoop

EU elections 2019: Trump’s share in the support of populism

Daughter of 2019 Sakharov Prize winner Ilham Tohti receives prize on his behalf

Can the EU last long if it cuts Cyprus out?

What happens when the Eurogroup decides to help Greece

Doctors vs. Industry 4.0: who will win?

In polarized America, a new divide looms

More Stings?

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