Major Banks Fined Billions for Collusion in Libor Scandal
The European Commission slapped major global institutions with a record $1.7 billion fine after finding that they had broken antitrust laws by rigging interest-rate benchmarks, which inform banks on how to manage related risk.
.The European Commission slapped major global financial institutions with a record 1.7 billion euro fine after finding that they had broken antitrust laws by rigging interest-rate benchmarks, which inform banks on how to manage related risk. That's about 2.3 billion in U.S. dollars.
The collusion affects markets in the European Economic Area, but American banks JPMorgan and Citigroup were included in the group of eight. Rounding out that list are Barclays, Deutsche Bank, RBS, Société Générale, UBS and RP Martin. Commission Vice President Joaquín Almunia said he was especially upset that the institutions were in cahoots:
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.
According to Reuters, the punishment is a big deal:
The penalty is the biggest yet to be handed down to banks for rigging the benchmarks used to determine the cost of lending, one of the most brazen violations of conduct seen during the financial crisis.
But, as is almost always the case when consequences are doled out for bank misbehavior, most groups implicated will avoid the full force of the Commission's ruling. Barclays and UBS have immunity from the punishment for acting as whistleblowers, and Deutsche Bank, RBS and Société Générale were given reductions for participating in the investigation and agreeing to a settlement. The Commission outlined each institution's ultimate punishment, organized per cartel participation, in a press release:
EIRD cartel (participants in the EIRD cartel rigged Euro interest rate derivatives)
| Participants | Duration of participation | Reduction under the Leniency Notice (%) | Fine (€) |
| Barclays | 32 months | 100% | 0 |
| Deutsche Bank | 32 months | 30% | 465 861 000 |
| Société Générale | 26 months | 5% | 445 884 000 |
| RBS | 8 months | 50% | 131 004 000 |
YIRD cartels (participants in the YIRD cartel rigged Japanese Yen interest rate derivatives, among other things)
| Participant | Duration of participation per infringement(s) | Reduction under the Leniency Notice (%) | Fine (€) |
| UBS (5 infringements) | 1 month, 8 months, 5 months, 10 months, 1 month | 100% for all infringements | 0 |
| RBS (3 infringements) | 8 months, 5 months, 3 months | 25% for one infringement | 260 056 000 |
| Deutsche Bank (2 infringements) | 10 months, 2 months | 35%, 30% | 259 499 000 |
| JPMorgan (1 infringement) | 1 month | 79 897 000 | |
| Citigroup (3 infringements) | 1 month, 2 months, 3 months | 35%, 100%, 40% | 70 020 000 |
| RP Martin (1 infringement) | 1 month | 25% | 247 000 |
JPMorgan recently agreed to a $13 billion settlement back in the U.S. for selling shoddy mortgage-backed securities that contributed to the housing market's collapse. Though the settlement may be impressive in itself, it still allows JPMorgan a way to avoid admitting explicit criminal activity.