EC issues fines totalling EUR1.7bn to eight banks for rigging financial benchmarks

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Banks involved in a financial cartel that colluded to fix crucial benchmark rates have been levied with fines that total EUR1.7bn by the European Commission, it was reported on Wednesday.

These benchmarks included the London interbank offered rate, or Libor, the Tokyo interbank offered rate and the euro area equivalents. The benchmark rates are used to price hundreds of trillions of dollars in assets ranging from mortgages to derivatives.

The rate rigging was described by European Commission vice-president Joaquin Almunia as “appalling examples of misconduct”.

UK bank Royal Bank of Scotland (RBS) is among the banks that had the record breaking fines imposed for fixing yen Libor and Euribor rates. Other organisations involved were Deutsche Bank, which received the biggest fine of EUR725.36m, Societe Generale and broking firm RP Martin, which is said to have facilitated one of the infringements by using its contacts with banks involved in settling Libor. Two US banks, JP Morgan and Citibank, were also involved in the cartel.

Barclays bank escaped being fined EUR690m, as it had voluntarily reported that the cartel was rigging Euribor rates. Swiss bank UBS also avoided a fine of EUR2.5bn for exposing the cartel in yen Libor fixing.

The European Commission said it will continue investigating Credit Agricole, HSBC, JPMorgan and brokerage ICAP for similar offences. Credit Agricole has reportedly refused to settle and is likely to face sanctions in 2014, while HSBC has also contested the penalty proposed by the European Commission.

Financial regulators in the UK and US have already levied fines on financial institutions including UBS, RBS, Barclays, Rabobank and ICAP for attempts to manipulate key interest rates. Also, certain individuals are facing criminal charges.

Sir Philip Hampton, the chairman of RBS, was cited as saying: “Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue. The RBS board and new management team condemn the behaviour of the individuals who were involved in these activities. There is no place for it at RBS.”

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