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Business News/ Industry / Banking/  JPMorgan hit hardest as EU fines Euribor trio $521 million
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JPMorgan hit hardest as EU fines Euribor trio $521 million

JPMorgan was fined 337.2 million, HSBC got a 33.6 million penalty and Crdit Agricole must pay 114.7 million

The EU’s investigation into Euribor manipulation was strained three years ago after Crédit Agricole, JPMorgan and HSBC refused to join a multi-bank settlement with four other lenders . Photo: ReutersPremium
The EU’s investigation into Euribor manipulation was strained three years ago after Crédit Agricole, JPMorgan and HSBC refused to join a multi-bank settlement with four other lenders . Photo: Reuters

Paris: JPMorgan Chase & Co., HSBC Holdings Plc and Crédit Agricole S.A. were fined a total of €485.5 million ($521 million) for rigging the Euribor (Euro Interbank Offered Rate) benchmark as European Union (EU) antitrust regulators wrapped up a five-year investigation into the scandal.

The trio colluded to rig the Euribor rate and exchanged sensitive information to suit their trading positions in correlated derivatives markets, in breach of EU antitrust rules, the European Commission (EC) said on Wednesday in an e-mailed statement.

JPMorgan was fined €337.2 million, HSBC got a €33.6 million penalty and Crédit Agricole must pay €114.7 million.

“The participation in such schemes was very lucrative for the banks," Margrethe Vestager, the EU’s antitrust commissioner, told journalists in Brussels, adding that it’s very difficult to make an exact estimate of their profits. “Tiny movements of the Euribor rate can have a huge impact given the trading volumes at stake."

The EU’s investigation into Euribor manipulation was strained three years ago after Crédit Agricole, JPMorgan and HSBC refused to join a multi-bank settlement with four other lenders including Deutsche Bank AG and Societe Generale SA. Since then, the holdouts have been a thorn in the commission’s side—successfully delaying the process and showing up the regulator for its handling of the case.

The four banks that settled the Euribor case were accused of sharing, via phone and through online chats, sensitive trading information among themselves and strategizing to push benchmark rates up or down to suit their trading positions.

Vestager said traders at the seven banks regularly used “vulgar language" in their interactions, which required “a kind of dictionary" to make sure the evidence wasn’t lost in translation.

“I think I would be seriously blushing if I were to repeat any of the wording in some of those chat rooms," she said.

The trio of holdouts were handed a statement of objections in May 2014 accusing them of colluding to rig Euribor rates in the wake of a global scandal embroiling some of the world’s biggest banks. By refusing to settle the case with the commission they forfeited the chance of a 10% discount on any fines.

Court Appeal

JPMorgan “did not engage in any wrongdoing with respect to the Euribor benchmark," Jennifer Zuccarelli, a spokeswoman for the bank in London, said in a statement. “We will continue to vigorously defend our position against these allegations, including through possible appeals to the European courts."

Crédit Agricole in a statement said it “firmly believes that it did not infringe competition law" and that “it will appeal the commission’s decision." The fine payment “will not affect the 2016 financial statements given the provisions set aside previously," the Montrouge, France-based bank said.

HSBC said it “did not participate in an anti-competitive cartel," and is also considering its legal options, according to a statement.

In late 2013, EU antitrust regulators issued penalties initially worth a total of €1.7 billion as part of a multi-bank settlement related to manipulation of the Libor (London Interbank Offered Rate) and Euribor benchmarks—a year and a half after Barclays Plc was fined by the UK and US authorities. The EU fines were reduced earlier this year by €218 million after the EU slashed Societe Generale’s Euribor penalty due to a calculation mistake.

About $9 billion in fines have been levied against a dozen banks by global authorities over the manipulation of the Libor and similar benchmarks in the last four years and more than 20 traders charged.

Libor and Euribor gauge banks’ estimated cost of borrowing over different periods of time. The rates are a benchmark used to calculate interest payments for trillions of euros worth of financial products including mortgages.

Last year, Tom Hayes, a former UBS Group AG and Citigroup Inc. employee, became the first trader to be jailed over the Libor scandal, and is serving an 11-year sentence in the UK for his part in rigging yen Libor. Several Euribor traders from Deutsche Bank and Barclays are due to stand trial in London next year. One trader from Societe Generale has also been charged.

Vestager left open the possibility of further fines for financial firms caught up in global scandals—but refused to be drawn on when the EU would wrap up a probe into the manipulation of currency markets.

This is “a very large, very complex case, with a lot of participants and that makes it very difficult" to give a timeline. Bloomberg

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Published: 07 Dec 2016, 07:32 PM IST
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