The European Commission has fined a group of major global banks a total of 1.7 billion euros (US$2.3 billion) for colluding to profit from the manipulation of key interest rates.
The banks that received fines, which include JPMorgan, Citigroup and Deutsche Bank, are accused of manipulating for years European and Japanese benchmark interest rates, which affect hundreds of billions of dollars in contracts globally, from mortgages to credit card bills.
Switzerland’s UBS bank escaped a massive 2.5 billion euro fine only because it informed the Commission, the EU’s executive arm, of a cartel’s existence and cooperated with the subsequent investigation.
“We want to send a clear message that we are determined to find and punish these cartels,” competition commissioner Joaquin Almunia said on Wednesday.
The commission is the latest of a group of organizations to punish banks for profiting from manipulating interest rates, after similar cases brought by US and national European market regulators.
The banks regularly contribute data to help compile market interest rates, which are then used as benchmarks for loans in the wider economy. The banks are thought to have profited by cooperating to fix the rates higher or lower depending on whether they — or their clients — held investments in derivatives that stood to gain.
In a first cartel, which operated from 2005 to 2008 and was focused on euro-denominated derivatives, Deutsche Bank received the largest fine, 468 million euros, followed by Societe Generale with 445 million euros. The Royal Bank of Scotland (RBS) was fined 131 million euros.
Deutsche Bank chief executive Juergen Fitschen referred to the euro cartel as a “legacy issue” caused by “past practices of individuals” at the bank.
Fitschen has worked at the bank since 1987 and became chief executive last year.
He acknowledged participating in the cartel had been a “gross violation” of the bank’s ethics.
However, he said the fine would not hurt the bank’s profits as it has already made provisions for fines it deems likely from regulators.
Barclays escaped a 690 million euro fine because it was the bank that notified the Commission of the euro cartel’s existence, while JPMorgan, HSBC and Credit Agricole denied wrongdoing.
A second cartel fined by the Commission on Wednesday operated from 2007 to 2010 and focused on derivatives based on the Japanese yen.
The largest fines went to RBS and Deutsche Bank, 260 million euros each, while UBS received immunity from fines amounting to 2.5 billion euros.
RBS, which has previously been fined by the US and British authorities in rate-fixing cases, was apologetic.
“The RBS board and new management team condemn the behavior of the individuals who were involved in these activities,” bank chairman Philip Hampton said. “There is no place for it at RBS.”