“In one case, the European Commission fined JPMorgan Chase €61.7 million euros for manipulating the Swiss franc Libor benchmark interest rate in an “illegal bilateral cartel” with the Royal Bank of Scotland. R.B.S.”, Jenny Anderson, New York Times
4 Banks, Including JPMorgan, Fined in Europe Over ‘Cartel’ Behavior
“Cartels in the financial sector, whatever form they take, will not be tolerated,” said Joaquín Almunia, the European Commission’s vice president in charge of competition policy.Credit John Thys/Agence France-Presse — Getty Images
LONDON – The European Commission on Tuesday fined four major financial institutions 93.9 million euros, or about $120 million, over two types of activity that it deemed as cartel behavior.
In one case, the European Commission fined JPMorgan Chase €61.7 million euros for manipulating the Swiss franc Libor benchmark interest rate in an “illegal bilateral cartel” with the Royal Bank of Scotland. R.B.S., however, was granted immunity and avoided a fine of €110 million after it revealed the existence of the cartel to the commission.
“Anti-cartel enforcement is a top priority for the commission and no sector is exempt, including the financial sector,” the European Union said in a statement.
Interest-rate derivatives – such as forward rate agreements, swaps, futures and options – are financial products intended to help manage interest-rate fluctuations. In December 2013, the European Union fined several global financial institutions a combined €1.7 billion to settle charges that they colluded to fix benchmark interest rates.
JPMorgan received a 40 percent reduction in its fine for cooperating with the investigation, as well as a 10 percent reduction for agreeing to settle the case. Regulators accused R.B.S. and JPMorgan of trying to distort the process used to price interest rate derivatives that were in francs from March 2008 through July 2009.
They discussed future rate submissions for Libor tied to the franc and, at times, exchanged information concerning trading positions and intended prices, regulators said.
JPMorgan said it had cooperated fully with the European Commission throughout the investigation.
“The settlement makes no finding that JPMorgan Chase management, or any other JPMorgan Chase employee, had any knowledge or involvement in the conduct at issue, or that the trader’s actions had any impact on the firms’ Swiss franc Libor submissions or the published Swiss franc Libor rates,” the bank said in a statement.
In a separate settlement also announced on Tuesday, the European Commission said R.B.S., UBS, JPMorgan and Credit Suisse, operated a cartel on bid-ask spreads of Swiss franc interest-rate derivatives, imposing fines worth a total of €32.4 million. R.B.S. avoided fines of €5 million on this case for bringing the activity to the commission’s attention.
European regulators said that from May to September 2007, R.B.S., UBS, JPMorgan and Credit Suisse agreed to quote to clients wider, fixed bid-ask spreads on certain categories of franc interest-rate derivatives. The banks maintained narrower spreads for trades among themselves.
The aim was to lower the banks’ transaction costs and continue the flow of trades between themselves while preventing others from participating on the same terms in the franc derivatives market. Unlike in previous cartels in the financial sector, this one was not about colluding to set a benchmark but rather about the banks agreeing on a wider bid-ask spread for the price of a particular financial derivative.
“Cartels in the financial sector, whatever form they take, will not be tolerated,” said Joaquín Almunia, the commission vice president in charge of competition policy.
In the second case, UBS paid the largest fine of €12.7 million, while JPMorgan paid a fine of €10.5 million. Credit Suisse paid a €9.2 million fine. UBS’s fines were reduced by 30 percent after it cooperated in the case, while JPMorgan’s fines were cut 25 percent and Credit Suisse did not get a reduction. All the banks got a 10 percent discount for settling with the commission.
UBS declined to comment on Tuesday. Credit Suisse said it decided to settle the case “in order to avoid lengthy legal proceedings.”
Global financial institutions have paid more than $6 billion in fines over manipulating benchmark rates.
Chad Bray contributed reporting.