EU antitrust regulators fined six financial institutions including Deutsche Bank, Royal Bank of Scotland and Citigroup a record total of €1.71 billion today (4 December) for rigging financial benchmarks.
The penalty is the biggest yet to be handed down to banks for rigging the benchmarks used to determine the cost of lending, one of the most brazen violations of conduct since the financial crisis. It is also the highest antitrust penalty ever imposed by the Commission, the EU's competition regulator.
The other banks penalised are Société Générale, JPMorgan and brokerage RP Martin.
Deutsche Bank received the biggest fine of €725.36 million.
The European Commission said it would continue to investigate Credit Agricole, HSBC, JPMorgan and brokerage ICAP for similar offences.
The benchmarks involved are the London interbank offered rate, or Libor, the Tokyo interbank offered rate and the euro area equivalents. They are used to price hundreds of trillions of dollars in assets ranging from mortgages to derivatives.
Shocking collusion between those meant to compete
"What is shocking about the Libor and Euribor scandals 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," EU Competition Commissioner Joaquin Almunia said in a statement.
RP Martin and ICAP could not be immediately reached for comment. Deutsche Bank said it has set aside enough money to cover most of the €725 million fine.
JPMorgan confirmed its €79.9 million penalty in the Libor case but said it would defend itself in the Euribor case. Société Générale declined to comment.
Unlike the six banks which admitted liability in return for reductions in their fines, Credit Agricole has refused to settle and will likely face sanctions next year. HSBC has also contested the EU's proposed penalty.
Both banks are expected to be formally charged in the coming days.
A spokesman for HSBC said the bank would defend itself vigorously in the Euribor case, while Barclays confirmed its cooperation with the Commission which helped it stave off a €690 million sanction.
RBS said its €391 million penalty had been fully provisioned for.
Almunia is now less naive about financial markets
Authorities around the world have so far handed down a total of €2.73 billion in fines to UBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges.
UBS paid a record fine of $1.5 billion late last year to the US Department of Justice and the UK's Financial Services Authority for rate-rigging.
EU fines can reach up to 10% of a company's global turnover.
UBS blew the whistle on the Libor and Tibor cases and will not be fined as a result. Barclays will escape a fine in the Euribor case because it alerted the Commission to the offence.
“I am no longer as naïve a believer in the workings of the financial markets as before,” said Almunia, handing down the fines. “And I was not a naïve believer before. In any case my belief has diminished a lot,” he added.
The European Commission proposed new rules in September 2013 that aim to avoid repeats of the scandals affecting the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor) in 2012.
The proposals would regulate a huge range of indexes covering finance, commodities, energy and currencies for the first time. They would also indirectly affect consumer banking products such as home loans and credit cards.
If agreed, the legislation will affect how all benchmarks are set, including North Sea Brent crude, which helps to determine gasoline prices.
But it stops short of handing direct regulatory authority over benchmarks to the European Securities and Markets Authority (ESMA), a move resisted by the City of London.
- 2013: Investigations into the cartels continuing against banks that refused to settle