European Union Levies Fines Against Citigroup, JPMorgan Chase, and Others

Today, the European Commission announced it would fine eight banks a total of $2.3 billion (€1.7 billion) for their pivotal roles in manipulating the benchmark London Interbank Offered Rate (LIBOR) interest rate as well as the Euro Interbank Offered Rate (EURIBOR) through their derivative trades.

The banks used currency derivatives denominated in either the euro (EIRD) or the yen (YIRD) to help manage the risk posed by fluctuations in interest rates. The fines for each bank are broken out in the table below:

Participant

Fine (€ millions)

Fine ($millions)

Involvement

Deutsche Bank (NYSE: DB  )

 € 465.9

 $633.6

Euro interest rate derivatives 

Société Générale

 € 445.9

 $606.4

Euro interest rate derivatives 

RBS (NYSE: RBS  )

 € 260.1

 $353.7

Yen interest rate derivatives 

Deutsche Bank

 € 259.5

 $352.9

Yen interest rate derivatives 

RBS

 € 131.0

 $178.2

Euro interest rate derivatives 

JPMorgan Chase  (NYSE: JPM  )

 € 79.9

 $108.7

Yen interest rate derivatives 

Citigroup (NYSE: C  )

 € 70.0

 $95.2

Yen interest rate derivatives 

Barclays (NYSE: BCS  ) was found to have been involved in the cartel surrounding EIRD, however it was the company that revealed the existence of the cartel and as a result of that it received immunity from a fine of € 690 million ($937.6 million). In June of 2012 Barclays was ordered to pay $200 million to the U.S. Commodity Futures Trading Commission for its role in manipulating LIBOR.

UBS had the longest involvement in the YIRD scandal, but it, too, received immunity for its seven infringements, and it therefore did not receive a fine of € 2.5 billion ($3.4 billion). In December of 2012 UBS received fines of $1.5 billion from the U.S. Department of Justice, the U.K. Financial Services authority as well as Swiss regulators.

In addition, in October Fannie Mae announced it would be suing nine banks for their roles in manipulating the interest rates that resulted in $800 million in losses to the government-sponsored entity.

"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," said European Commission Vice-President of competition policy, Joaquín Almunia in today's EC press release. "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."

In a response to the fine, Deutsche Bank Chief Executive Juergen Fitschen referred to the euro cartel as a "legacy issue" caused by "past practices of individuals" at the bank. He acknowledged participating in the cartel had been a "gross violation" of the bank's ethics. But he said the fine wouldn't hurt the bank's profits as it has already made provisions for the fines it deemed likely from regulators.

Societe Generale said its role was limited to a single trader who acted without knowledge of management. RBS was more apologetic. Chairman Philip Hampton said the bank's management became aware some of its employees had been helping fix rates in 2011 and has taken action to prevent it happening again.

-- Material from The Associated Press was used in this report.

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