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HSBC, JP Morgan, Crédit Agricole fined EUR 485m for rate rigging

07 December 2016, 23:04 CET
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HSBC, JP Morgan, Crédit Agricole fined EUR 485m for rate rigging

Margrethe Vestager - Photo © European Union 2016 Mauro Bottaro

(BRUSSELS) - Crédit Agricole, HSBC and JPMorgan Chase were fined a total of EUR 485 million by the EU Commission Wednesday for their participation in the Euribor cartel in euro interest rate derivatives.

The three banks colluded on a financial product known as euro interest rate derivatives in breach of EU anti-trust rules, according to the EU executive, and exchanged sensitive information.

The EURIBOR is a benchmark interest rate intended to reflect the cost of interbank lending in euros. It is widely used in international money markets and is based on the EURIBOR panel banks' individual quotes submitted daily to a calculation agent. EURIBOR rates may affect either the cash flows that a bank receives from a counterparty, or the cash flow it needs to pay to the counterparty.

"Banks have to respect EU competition rules just like any other company operating in the Single Market," said the Competition Commissioner Margrethe Vestager: "A sound and competitive financial sector is essential for investment and growth," she added.

In December 2013, the Commission reached a settlement concerning the same cartel with Barclays, Deutsche Bank, RBS and Société Générale.

Crédit Agricole, HSBC and JPMorgan Chase chose not to settle, however, and the investigation continued under the Commission's standard cartel procedure. Today's decision marks the end of a cartel investigation that was the first of several in the financial services sector.

The euro derivatives market is very important not only to banks but also to many companies throughout Europe, which use euro interest rate derivatives to hedge their financing risk.

The Commission found that participating traders were in regular contact through corporate chat-rooms or instant messaging services. The traders' aim was to distort the normal course of pricing components for euro interest rate derivatives. They did this by telling each other their desired or intended EURIBOR submissions and by exchanging sensitive information on their trading positions or on their trading or pricing strategies.

This means that the seven banks colluded instead of competing with each other on the euro derivatives market.

The anti-competitive practices concerning benchmark interest rates have led to a more stringent regulatory framework. In June 2016, the European Parliament and the EU's Council of Ministers adopted a new Regulation on benchmarks. The Regulation makes it a violation of capital markets rules to manipulate benchmarks, such as EURIBOR, and reinforces the investigative and sanctioning powers of financial regulators.

More information will be available on the Commission's competition website, in the public case register under the case number 39914.

Antitrust Damages Directive

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