EU imposes €485m fine on banks for Euribor manipulation
HSBC, JP Morgan Chase and Crédit Agricole have been fined €33m, €337m and €114m respectively by the European Union competition commissioner for being part of a cartel that manipulated the Euribor interest rate. The rate is the Eurozone equivalent to Libor. The three banks, which deny wrongdoing and may appeal, were part of a seven-bank group. The four other members, Barclays, Deutsche Bank, Royal Bank of Scotland and Société Générale, previously settled for €820m with the commission in 2013.

A five-year investigation by competition authorities in Brussels into rigging of interest rates drew to a close on Wednesday when three major banks – including HSBC – were fined €485m (£412m) for colluding to manipulate a crucial benchmark rate.

The three banks, which also included JP Morgan Chase and Crédit Agricole, did not agree to an earlier settlement involving a seven-bank cartel over the setting of the interest rate known as Euribor. All three deny wrongdoing.

JP Morgan was fined €337m, HSBC €33m and Crédit Agricole €114m. The levels were based on the time they participated in the cartel and the value of products involved.

Margrethe Vestager, the EU competition commissioner, said: “A sound and competitive financial sector is essential for investment and growth. Banks have to respect EU competition rules just like any other company operating in the single market.”

Four other banks – Royal Bank of Scotland, Barclays, Deutsche Bank and Société Générale – settled with the commission in 2013 for €820m.

Those penalties came at a time when the industry was reeling from the rate-rigging scandal and the announcement on Wednesday served as a reminder of the misconduct matters that continue to plague the industry.

The three banks fined on Wednesday had not participated in the 2013 settlement and JP Morgan said it was considering a possible appeal to the European court. Crédit Agricole said it would appeal. HSBC said it was considering its legal options.

Vestager said the commission had found “chats” between traders congratulating themselves on setting the rate to levels that suited their means in a cartel which operated between September 2005 and May 2008.

She described it as “a closed community with a very free language”. Financial regulators have previously published electronic correspondence with traders using colourful language as they encouraged each other to move interest rates.

Euribor is the eurozone’s version of Libor – the London interbank offered rate, which is ultimately used to value a range of financial products ranging from interest rates swaps between companies to mortgage products for households.

“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,” the commission said.

“This means that the seven banks colluded instead of competing with each other on the euro derivatives market. This market is very important not only to banks but also to many companies in the single market, which use euro interest rate derivatives to hedge their financing risk,” the commission added.

The rate-rigging scandal erupted in June 2012 when Barclays was fined £290m by regulators on both sides of the Atlantic, unleashing a wave of public anger about banks and sparking the parliamentary commissions into banking standards. It also led to a wave of other fines on banks and prompted the Treasury to change the rules so that the fines went to the exchequer rather than back to the regulator.

The way the benchmarks are set has also been overhauled while criminal investigations have been launched.

A spokesperson for JP Morgan said: “We have cooperated fully with the European commission throughout its five-year investigation. We did not engage in any wrongdoing with respect to the Euribor benchmark. We will continue to vigorously defend our position against these allegations, including through possible appeals to the European courts.”

HSBC said the decision related to “purported conduct” during one month in early 2007. “We believe we did not participate in an anti-competitive cartel. We are reviewing the European commission’s decision and considering our legal options,”it said.

“Crédit Agricole firmly believes that it did not infringe competition law,” the French bank said.

Just months after fines for Libor rigging were slapped on banks, it emerged that other markets were being manipulated. Vestager said an investigation into the manipulation of foreign exchange markets was continuing and was “a very large complex case with many participants”.