Banks Slapped with $2.3 Billion Fine for Rate Manipulation

Before you go, we thought you'd like these...

Banks Slapped with $2.3 Billion Fine for Rate Manipulation
Yves Logghe/APEuropean Commissioner for Competition Joaquin Almunia.

By Catherine Boyle

Some of the world's biggest banks have been hit with a 1.71 billion euros ($2.3 billion) fine for interest-rate rigging by traders, the largest fine ever imposed by the European Commission.

Joaquin Almunia, vice-president of the European Commission and the commissioner responsible for competition, said in a statement: "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.

"Today's decision sends a clear message that the commission is determined to fight and sanction these cartels in the financial sector. Healthy competition and transparency are crucial for financial markets to work properly, at the service of the real economy rather than the interests of a few," he added.

The offenses involved traders conspiring to fix the European interbank offered rate, known as Euribor, and its Japanese equivalent, the Yen London interbank offered rate -- Yen Libor, for profit.

The banks to be fined are Citigroup (C), Deutsche Bank (DB), Royal Bank of Scotland (RBS), JPMorgan (JPM) and Societe Generale. %VIRTUAL-article-sponsoredlinks%Deutsche has to pay out the biggest fine for conspiring to rig both rates, with a 725 million euros bill. RBS was also fined over the setting of both kinds of rates, and must pay a total of 391 million euros.

At the other end of the scale, U.K. broker RP Martin was fined 247,000 euros for one infringement relating to Yen Libor.

Investigations into Credit Agricole, HSBC (HSBC), JPMorgan and broker Icap are ongoing.

"The settlement makes no finding that JPMorgan Chase management had any knowledge or involvement in the conduct at issue, or that the traders' actions had any impact on the firm's Libor submissions or the published Libor rates," a JPMorgan spokeswoman said in a statement.

The bank "intends to defend itself fully" against additional allegations its traders rigged Euribor -- but has admitted that its employees rigged Yen Libor.

UBS has previously admitted taking part in the rigging of Yen Libor, but has avoided a 2.5 billion fine by blowing the whistle on other banks. It took part in five violations of regulations uncovered by the EC, while other banks involved took part in 1-3 infringements.

Barclays, which also avoided a 690 million euros fine from the European Commission over its role in Euribor manipulation, was the first bank to announce a fine over the London equivalent, Libor, last year, which kicked off a slew of revelations about the fixing of the rate, which affects things like the rates paid on mortgages and savings. The interest-rate rigging is one of many reputational issues facing global banks at the moment.


More from CNBC:

8 PHOTOS
Bank Scandals
See Gallery
Banks Slapped with $2.3 Billion Fine for Rate Manipulation

Swiss bank UBS blames a rogue trader at its London office for a $2.3 billion loss that is Britain's biggest-ever fraud at a bank. Kweku Adoboli, the 32 year old trader, is sentenced to seven years in prison. Britain's financial regulator fines UBS after finding its internal controls were inadequate and allowed Adoboli, a relatively inexperienced trader, to make vast and risky bets.

The case has echoes of Societe Generale trader Jerome Kerviel, who hid €5 billion in losses. Kerviel said SocGen turned a blind eye to his colossal positions in late 2007 and early 2008 as long as they made money for the bank.

Wells Fargo Bank agrees to pay at least $175 million to settle U.S. Department of Justice accusations that it discriminated against qualified African-American and Hispanic borrowers from 2004 through 2009. The department said the bank's discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.

JPMorgan Chase announces a loss of $2 billion from a trade that was meant to protect the bank if the global economy sharply deteriorated. Later, losses from the bad trade swell to nearly $6 billion and shave much more from the company's stock market value. The episode heightens concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis.

Barclays agrees to pay more than $450 million to U.S. and British regulators to settle charges that it attempted to manipulate a global benchmark interest rate known as LIBOR. The rate indirectly affect the costs of hundreds of trillions of dollars in loans that people pay when they get loans to go to college, purchase a car or buy a house. Numerous other banks are under investigation for similar violations.

UBS pays $1.5 billion to settle LIBOR manipulation charges with regulators in the U.S., Britain and Switzerland. The bank says some of its employees tried to rig LIBOR in several currencies.

An independent review finds Kabul Bank spirited some $861 million out of war-torn Afghanistan in a massive fraud based on fake loans to 19 individuals and companies. A bailout of the bank costs the equivalent of 5 percent of Afghanistan's gross domestic product, making it one of world's largest banking failures ever.

HSBC, Europe's largest bank, says it's paying $1.9 billion in penalties to settle a U.S. money laundering probe. The investigation into HSBC focused on the transfer of billions of dollars on behalf of nations such as Iran and the transfer of money from Mexican drug cartels. The bank said its anti-laundering measures were inadequate and said it was "profoundly sorry."

of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading