Total fine for interest rate derivatives cartels smashes EU record

Bundled together, the fines imposed on banks and a broker in the Euro and Yen denominated interest rate derivatives cartels based respectively on EURIBOR and LIBOR total over €1.7bn.


  • On 04 December 2013, the European Commission fined six banks and a broker a total of over €1.71bn for colluding in cartels relating to interest rate derivatives denominated in Euro or yen. 
  • The headline fine relates to one cartel in Euro interest rate derivatives (EIRD) and seven separate bilateral cartels in Yen interest rate derivatives (YIRD). 
  • The Commission focused only on infringements of competition law, any unlawful manipulation of the benchmarks themselves being investigated and, where appropriate, sanctioned by the relevant financial regulators under their regulatory enforcement powers.

The cartel in Euro interest rate derivatives (EIRD)

In its 04 December 2013 decision, the Commission found that Barclays, Deutsche Bank, RBS and Société Générale, had been involved in a cartel which sought to distort EURIBOR, the benchmark underlying  for these derivatives, between September 2005 and May 2008.  Traders of the different banks infringed the competition rules by discussing their bank’s EURIBOR submission as well as its trading and pricing strategies.

Barclays was granted full immunity as the whistleblower on the cartel, and so avoiding a fine of around €690m. RBS received the second largest reduction in fine of 50%, resulting in a fine of £131,004,000, followed by Deutsche Bank (30%, fined €465,861,000) and Société Générale (5%, fined €445,884,000). Barclays and Deutsche Bank were found to have participated in the infringement longest (32 months) followed by Société Générale (26 months) and RBS (eight months).

All four banks settled with the Commission and received a further 10% reduction in their fine for doing so. Credit Agricole, HSBC and JPMorgan did not settle and will continue to be investigated under the Commission’s standard cartel procedure.

The cartel in Yen interest rate derivatives (YIRD)

The Commission found that seven distinct bilateral infringements had taken place from 2007 to 2010, each lasting between one and ten months. The Commission found that RBS (fined €260,056,000), Deutsche Bank (€259,499,000), JPMorgan (€79,897,000), Citigroup (€70,020,000) and the broker RP Martin (€247,000) had been involved in one or more of the infringements, and that UBS had been involved in five of them. The Commission decided that there had been collusion between traders at the various banks on certain JPY LIBOR submissions, as well as, on occasions, exchange of commercially sensitive information relating either to trading positions or future JPY LIBOR submissions, and, in one infringement, relating to future submissions for Euroyen TIBOR.

RP Martin was found to have facilitated one of the infringements by using its contacts at other, non-infringing, panel banks to influence the daily submissions. The Commission has also opened proceedings against ICAP, the cash broker, which is still ongoing.

Had UBS not received full immunity as the whistleblower on five of the cartels, it would have been in line for fines totalling some €2.5bn – a record for a fine imposed on an individual company by the Commission, or indeed overall in any cartel to date. Citibank was granted full immunity in one of the remaining infringements, avoiding approximately €55m in additional fines. All except JPMorgan benefitted from a reduction in their fines under the Commissions leniency programme.

All six companies received a 10% reduction in their fine for settling with the Commission.

Relationship with other investigations into LIBOR and EURIBOR

The Commission stresses that its sole focus has been on punishing collusion between competitors on the derivatives market as a breach of competition law, whilst the relevant financial regulators focus on investigating and sanctioning any manipulation of the benchmarks themselves as breaches of financial regulatory law.  As the Commission sees it, the fact that other authorities may have investigated and fined the same undertakings for actions relating to the benchmarks cannot relieve the Commission of its responsibility to identify and punish breaches of competition law.  It is, as the Commission emphasises, looking at benchmark setting from a different angle. However, while the angle may be different, the conduct that it is analysing may be the same – discussion amongst competitors of submissions for calculating a benchmark, for example.  The Commission distinguishes its jurisdiction from that of the financial regulators by focusing on the impact of that behaviour on the downstream derivatives market.  The fact that the Commission has chosen in its press announcements to address the issue of parallel enforcement powers at all, however, suggests that it is aware of the fine line that needs to be trodden between legitimately sanctioning a breach of competition law and punishing an undertaking a second time for the same conduct.

The importance that the Commission attaches to the issue of benchmarking is reflected in its proposed Regulation on indices used as benchmarks in financial instruments and financial contracts, which was published on 18 September 2013. The planned measures are intended to help restore consumer confidence in the integrity of benchmarks such as LIBOR and EURIBOR within the EEA.

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