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02/12/2016

Commission told to apologise over Euribor rate-rigging inquiry

Competition

Commission told to apologise over Euribor rate-rigging inquiry

Joaquin Almunia, former Competition Commissioner.

[European Parliament / Flickr]

The European Commission was told yesterday (12 March) to apologise and put in place stricter guidelines on public statements regarding open investigations, after the EU Ombudsman found a Commissioner made biased statements during a cartel inquiry into the Euribor rate-ringing scandal.

The Ombudsman is an independent EU body that has the right to investigate the Union’s institutions on the grounds of maladministration.

Emily O’Reilly, who currently holds the post, said, “The new Commission should acknowledge the maladministration that has occurred in this case under the previous Commission, apologise, and make sure that this does not happen again.”

The inquiry

In 2013, the Commission opened a competition investigation into a number of companies, including the French bank Crédit Agricole, probing their alleged participation in a cartel manipulating the Euribor interest rate benchmark. 

Eight of them admitted violating EU antitrust rules and agreed to pay a fine of more than €1 billion but Crédit Agricole, HSBC, and JPMorgan refused to settle. 

A year later, in the middle of the ongoing investigation, Crédit Agricole wrote to the Commission “raising objections concerning its objectivity and impartiality”.

The bank claimed that public statements made by then Competition Commissioner Joaquín Almunia, before the investigation was opened, implied that his services had already decided the banks broke EU antitrust law.

“The gravity of the infringement was ‘above average’, which would draw the amount of the sanction upwards,” Almunia told the European Parliament in September 2012.

After the Commission rejected Crédit Agricole’s objections, the bank complained to the Ombudsman.

Ombudsman’s assessment

After evaluating the complaint, O’Reilly concluded that “the Commission committed an instance of maladministration”.

“Statements by former Competition Commissioner Joaquín Almunia about an ongoing cartel investigation involving the French bank Crédit Agricole created a public impression of bias, that the former Commission had already reached a conclusion about the bank’s alleged participation in the cartel before the investigation was complete,” she said.

Given that Almunia’s mandate ended in October 2014 and a new Commissioner, Margrethe Vestager, is in charge of the case, O’Reilly said that the outcome of the case will not be affected. But she asked the Commission to avoid similar situations in the future by adopting new rules and admitting its mistakes.

Old feud   

It is not the first time O’Reilly has clashed with Almunia. In July 2014, she accused him of a conflict of interest in the handling of a tax investigation into four Spanish football clubs.

The Ombudsman said the Commission was guilty of bad administration after it failed to act on the case for more than four years, sparking a war on words. 

>> Read: Almunia counter-attacks in high-profile Spanish football tax case

The Commission has now three months to issue guidelines in response to the Ombudsman’s recommendations. It should also send the watchdog an explanation of how it will implement the new rules.

O’Reilly, however, cannot enforce her decisions on the EU institutions. The Ombudsman can only suggest recommendations, encourage a compromise between the two sides, or close an investigation with a critical report.

Background

The Commission is investigating three large international banks – Crédit Agricole, HSBC and JPMorgan Chase - for participating in a cartel for interest rate derivatives denominated in the euro currency. The Commission said in a statement, that preliminary conclusion show that these three banks may have participated in this cartel too. If confirmed, such behaviour would be a breach of the EU's antitrust rules that prohibit anticompetitive agreements.

In December 2013, the Commission already imposed fines totalling €1.7 billion on eight international financial institutions as they had agreed to settle the case.

>> Read: Libor/Euribor bank cartel hit with largest Commission fine

Timeline

  • 30 June 2015: Commission to send a detailed opinion to the Ombudsman on the recommendation
  • 2015: Commission's cartel investigation ongoing

Further Reading

EU Ombudsman

  • The case: A Commission's anti-trust investigation into an alleged cartel
  • Draft recommendation of the European Ombudsman in the inquiry into complaint against the European Commission

European Commission