EU Slaps Big Banks With $2.3B in Rate Manipulation Fines

NEW YORK (TheStreet) -- The European Commission on Wednesday announced a series of fines totaling 1.71 billion euros ($2.32 billion) against eight large banks, "for participating in illegal cartels in markets for financial derivatives covering the European Economic Area.

The EU said four of the large international banks colluded to manipulate the London Interbank Offered Rate (LIBOR) or the Euro Interbank Offered Rate (EURIBOR). These banks include Barclays (BCS), Deutsche Bank (DB), Societe General  and Royal Bank of Scotland (RBS).

Barclays was not fined, as it was granted immunity for "revealing the existence of the cartel" to the European Commission. Barclays was the first large bank to settle to settle LIBOR investigations, agreeing in June 2012 to pay U.S. and European regulators $454 million. The other three banks had their fines reduced in return for cooperation and agreements to settle with the EU.

Here are the fines handed down to the "cartel in Euro interest rate derivatives (EIRD)," to use the European Commission's label for the group:

  • Barclays: Zero
  • Deutsche Bank: 465,861,000 euros ($633 million)
  • Society General: 445,884,000 euros ($606 million)
  • Royal Bank of Scotland 131,004,000 euro ($178 million)

The EU said six institutions "participated in one or more bilateral cartels relating to interest rate derivatives denominated in Japanese yen." These companies include UBS, RBS, Deutsche Bank, JPMorgan Chase (JPM)JPM, Citigroup (C), and British broker RP Martin Holdings.

UBS received full immunity "for revealing to the Commission the existence of the infringements." UBS agreed in December 2012 to pay $1.5 billion to settle LIBOR probes with several regulators, and the company's Japanese subsidiary even plead guilty to a Justice Department charge of rate-rigging.

Citigroup received immunity for one of its three infringements, while all five companies (save UBS) received 10% reductions in their fines as part of settlement agreements.

Here are the fines against the "cartels" in Yen interest rate derivatives (YIRD):

  • UBS: Zero
  • RBS: 260,056,000 euros ($353 million)
  • Deutsche Bank: 259,499,000 euros ($353 million)
  • JPMorgan Chase: 79,897,000 euros ($109 million)
  • Citigroup: 70,020,000 euros ($95 million)
  • RP Martin: 247,000 euros ($336,000)

The European Commission's announcement doesn't bring the LIBOR scandal to a close, as Fannie Mae (FNMA) in late October sued eight banks, seeking "at least" $800 million over losses tied to libor manipulation. Fannie's sister government sponsored enterprise (GSE) Freddie Mac (FMCC), sued a dozen banks over LIBOR losses back in March.

Regulators, including the Securities and Exchange Commission, are continuing their LIBOR manipulation investigations.


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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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