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European Commission

Joaquín Almunia

Vice President of the European Commission responsible for Competition Policy

Introductory remarks on cartels in the financial sector

Press conference

Brussels 4 December 2013

Today the Commission has taken decisions in two cartel cases in the financial sector.

We have reached settlements with 8 financial institutions which violated EU antitrust rules and we have sanctioned them for these infringements. The total fines imposed today amount to 1.7 billion euros. This is the highest total amount ever imposed by the Commission for breaches of antitrust rules - even if some entities under investigation have not participated in the settlement and our proceedings continue for them. The companies who concluded today's settlements are Barclays, Deutsche Bank, the Royal Bank of Scotland, Société Générale, UBS, JP Morgan, Citigroup and RP Martin.

Among these 8 companies, 4 participated in a cartel in the market for interest rate derivatives denominated in euros (Barclays, Deutsche Bank, Royal Bank of Scotland and Société Générale). 6 participated in one or more bilateral cartels in the market for interest rate derivatives denominated in yen (Citigroup, Deutsche Bank, JPMorgan, Royal Bank of Scotland, RP Martin and UBS). Deutsche Bank and RBS participated in both infringements.

Interest rate derivatives, such as swaps, futures, options or forward rate agreements, are financial contracts which are used by banks or companies. These financial products play a very important role in the economy, since they work as a kind of insurance mechanism against the fluctuations of interest rates. They are meant to allow for an efficient management of the risk that such variations entail.

Thousands of European companies may use these products, for example if they have contracted a loan with a variable interest rate and want to hedge their risk. Those companies that are active internationally may also want to protect themselves against changes in interest rates in foreign currencies such as the Japanese yen.

Investment banks compete with each other in the trading of these financial derivatives. Indeed, for these markets to work properly and bring benefits to the real economy, transparency and healthy competition are crucial.

Obviously, the picture may look very different if derivatives markets are rigged to benefit the private interests of a few, because financial institutions decide to collude instead of competing. The decisions taken today provide appalling examples of such misconduct.

Let me recall, before I get to the facts, that these financial instruments derive their value from the level of a benchmark interest rate, such as LIBOR – which is used for various currencies including the Japanese yen (JPY) – or EURIBOR, for the euro. These benchmarks are meant to reflect the cost of interbank lending in a given currency. They reflect an average of the quotes submitted daily by a number of banks who are members of a panel.

In the cartel covering euro derivatives, we found that the participating banks coordinated with each other to influence the EURIBOR benchmark. They also discussed confidential and commercially sensitive information that they are not allowed to share with other market players. They exchanged on their pricing and trading strategies and trading positions. As I said before, the banks included in our settlement here are Barclays, Deutsche Bank, Royal Bank of Scotland and Société Générale.

We also found a series of bilateral infringements covering yen derivatives. The settlement here covers five leading global banks – UBS, Royal Bank of Scotland, Deutsche Bank, JP Morgan and Citigroup – as well as one cash broker, RP Martin, who facilitated the collusion. There were discussions between the banks' traders about the upcoming submissions to the panels for the relevant benchmarks – i.e. Yen LIBOR and, in one case, Euroyen TIBOR, which is an interest rate benchmark set in Tokyo. The aim of these talks between traders was to increase their banks' profits and in turn their own bonuses. They also shared commercially sensitive information of the type that competitors normally keep secret.

I repeat that the two decisions taken today in the euro and the yen cases are addressed to companies that agreed to settle with the Commission. These companies have decided to turn the page and acknowledge their wrongdoing under EU competition law. As a result, the investigation for them was shorter than it would otherwise have been – and I can add that these are two of the swiftest cartel settlements the Commission has concluded since the introduction of our settlement procedure in 2008. In line with that procedure, all companies received a 10% reduction of their respective fines for agreeing to settle.

Barclays (in the euro case) and UBS (in the yen case) received full immunity from fines because they were the first to reveal the existence of the infringement to the Commission. Similarly, Citigroup received immunity from fines in relation to one of the infringements relating to yen.

Immunity, as well as fines reductions for other companies that cooperated with the investigation, was granted in the context of our leniency programme. Let me stress that this has proved to be an extremely effective tool in the fight against cartels. Because they are secret, cartels are very difficult to detect and prove. Providing such incentives to companies that choose to reveal the existence of a cartel to the Commission is simply indispensable for any public authority that is serious about detecting and sanctioning cartels.

Our investigations will now continue for a number of parties.

In the euro case, we have opened proceedings also against Crédit Agricole, HSBC and JP Morgan Chase. In the yen case, we have also opened proceedings against the cash broker ICAP.

While we fully respect the presumption of innocence until the end of antitrust proceedings, the Commission is of course determined to pursue all those who may have been involved in a cartel. If their participation is established, we will launch the corresponding Statement of Objections against them, and if our concerns are confirmed, they will indeed receive the adequate sanction.

I am convinced that the rigorous enforcement of competition rules against financial institutions that infringe them – including the facilitators of such violations – is essential for restoring trust in financial markets and in benchmark rates. Of course other efforts are needed at the regulatory level. This is why the Commission has proposed legislation to improve the reliability of financial benchmarks in September. The objective of the draft regulation is to avoid conflicts of interest, make sure that benchmarks reflect the economic reality they are intended to measure and that they are used appropriately.

But on top of this, we need to ensure that there is no collusion, just like in any other sector of the economy. Antitrust enforcement therefore comes in complement to the action of financial regulators and authorities worldwide, including those that have sanctioned market abuses. Indeed, what is shocking about the LIBOR and EURIBOR scandals is not just the manipulation of benchmarks, but also the setting up of genuine cartels between a number of financial players.

Today's decision sends a clear message that the Commission is determined to fight and sanction these cartels in the financial sector. Enforcing competition rules can help ensure that financial markets truly work at the service of the real economy, not the interests of a few.


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