Following an in-depth probe into suspected manipulation of benchmark Eurozone interest rates, the EU competition regulators have announced their intention to fine Deutsche Bank, JP Morgan, HSBC, Royal Bank of Scotland, Crédit Agricole and Société Générale.


Two years ago, the European Commission, which is the EU's antitrust authority, raided several large banks for suspected fixing of the Euro Interbank Offered Rate (“Euribor”). This follows an earlier investigation into the manipulation of the London Interbank Offered Rate (LIBOR). The LIBOR investigation led to significant fines for Barclays, UBS, and Royal Bank of Scotland.

In addition to Euribor and Libor, the Commission is investigating the suspected rigging of the Tokyo Interbank Offered Rate and the Swiss franc. It is also carrying out an investigation into credit derivatives involving 13 top investment banks including Citigroup (C.N), Goldman Sachs (GS.N), financial data company Markit and the International Swaps and Derivatives Association (ISDA).

Benchmarks, which are at the heart of the financial system, have until now been largely unregulated and unsupervised. Euribor is the benchmark for pricing €250 trillion of financial instruments, to which financial contracts, including residential mortgages and savings, are linked. Benchmark manipulation can therefore cause significant losses to consumers and investors, distort the real economy, and undermine market confidence.


In antitrust matters, the EU has the power to impose fines up to a maximum of 10% of a company’s global revenue. In the case of the Euribor investigation, the fines are expected to be towards the lower end of the scale but could still be very significant indeed. Some of the banks have agreed to settle with the Commission in return for a reduction in their fines; others, including HSBC, are contesting the proposed penalties. The advantages to banks of entering into settlement discussions with the Commission are (a) to shorten the duration of the infringement and (b) to lower the value of the sales taken into account to calculate the fine.

The proposed penalties represent the first punishments handed out by the Commission following the Euribor investigation.

The final cost to banks will mount if investors who believe they have lost money because of rate manipulation use the settlements to sue for damages. The English courts are already considering whether attempted manipulation of Libor can invalidate loans and other contracts or show that banks mis-sold products that were based on the rate.

The EU Commission announced in September 2013 its intention to introduce EU-wide legislation covering a broad variety of benchmarks, not just interest rate benchmarks such as LIBOR, but also commodity benchmarks, energy and currency derivatives for example. The proposed legislation is in line with the principles recently agreed by the International Organization for Securities Commissions and is aimed at restoring confidence in the integrity of benchmarks.

Parallel inquiries are being conducted by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission and the U.K.’s Financial Conduct Authority. Last month enforcement officials from these agencies, in conjunction with the Dutch Prosecutor’s Office, fined Dutch financial giant Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (known as Rabobank), over U.S. $1 billion for manipulating LIBOR and Euribor. Previously, the three U.S. regulators entered into settlements with ICAP Europe Limited, The Royal Bank of Scotland, UBS AG and Barclays PLC for manipulating benchmark interest rates. Those probes are continuing.