Brussels will unveil hefty fines as soon as Wednesday on global banks that allegedly formed cartels to rig two global interest rate benchmarks, in a settlement that is set to break European antitrust enforcement records. The latest crackdown on benchmark manipulation is expected to target up to 10 financial institutions. Some will admit wrongdoing while others will face formal charges alleging they colluded to fix Euribor, Yen Libor or both. The exact level of fines remains confidential, but the commission has warned some banks it is seeking combined fines of hundreds of millions of euros for those groups involved in both cartels.
The decision will be announced by Joaquín Almunia, the EU competition commissioner, will add to the escalating costs of a scandal that has rocked the financial sector. The multi-bank deal will also provide a more comprehensive account of alleged collusion between traders at different institutions, people familiar with the settlements said.
Each of the two cases – one focused on the Yen Libor and the other on Libor’s European sister benchmark – involve around half a dozen banks or brokers, the people said. Most banks involved – including Royal Bank of Scotland, Deutsche Bank, Société Générale and Citi – have been discussing a settlement that would see them fined for attempting to act in concert to rig the benchmarks and profit from related interest rate derivatives. Barclays will avoid a fine for Euribor manipulation while UBS will not be fined for Yen Libor because they alerted EU officials to the illegal practices. But both banks will admit wrongdoing, a move that could still leave them vulnerable to private damages claims in the courts. Some banks – JPMorgan, HSBC and Crédit Agricole – have been involved in the talks but were last month balking at signing a joint Euribor settlement. Banks that hold out are expected to face formal charges that could pave the way for fines at a later stage. Interdealer broker ICAP is not part of the joint settlement. The announcement will be an unwelcome reminder of past sins for an industry still struggling to cope with a series of scandals ranging from mis-selling of mortgage-backed securities and consumer products to alleged manipulation of foreign exchange benchmarks. The European Commission decision is to be formally adopted by the college of commissioners on Wednesday, according to the meeting agenda. The exact level of fines remains confidential and it not even known by the banks involved. But the commission warned some banks that it is seeking a fine of as much as €800m each for groups involved in both cartels. The range of fines for the individual banks will vary significantly and depends on a mix of culpability and leniency for co-operation. Once the investigation is complete and all banks are fined, the penalty is expected to break antitrust records in Europe; to date the highest combined EU fine for a cartel is around €1.5bn. One person familiar with the case said the fines for Yen Libor are expected to be significantly smaller than the penalties for Euribor manipulation. There are EU guidelines for calculating cartel fines but the rules have never been applied to markets in financial instruments. The commission can impose a maximum penalty equivalent to 10 per cent of a company’s global turnover for each cartel it is found to be involved with. Four banks – Barclays, RBS, UBS, Rabobank – and broker ICAP have already paid a total of $3.5bn in fines to settle with regulators around for world for Libor-related abuses. However, the EU antitrust authorities have not been party to those deals and for three years pursued their own investigation relating to breaches of antitrust law. A third EU cartel probe into alleged Swiss franc Libor abuses is still in progress. Unlike US antitrust regulators, Brussels will not settle with individual cartel members and it only concludes cases simultaneously with all or most of the companies involved. Those banks refusing to settle would face formal charges – a so-called statement of objections – that could eventually lead to an antitrust ruling and a fine. The main incentive to settle under EU rules is the 10 per cent reduction in fines and a shorter and less detailed charge sheet against the cartel, which limits the potential for private damages claims. Those holding out have the opportunity to fight the charges in commission-organised hearings and eventually to appeal against any decision in the courts. All the banks and the commission declined to comment.