EU Files Complaints in Euribor Rigging

Banks accused of rate-rigging cartel in European Union's "statement of objections."

JPMorgan Chase & Co., HSBC Holdings Plc, and Credit Agricole SA were accused today by the European Union’s (EU's) antitrust arm of colluding to manipulate interbank lending rates.

The trio received antitrust complaints alleging that they participated in a cartel to rig Euribor. The so-called "statement of objections" is the next step in the EU enforcement process after the lenders dropped out of settlement talks last year.

The European Commission “has concerns that the three banks may have taken part in a collusive scheme which aimed at distorting the normal course of pricing components for euro interest rate derivatives,” it said in an e-mailed statement.

While six financial firms, including Societe Generale SA, agreed in December to a combined record of 1.7 billion euros (US$2.3 billion) in fines in the Euribor case and a similar yen Libor probe, the regulator’s attempt to get a clean sweep of settlements was ruined by the dropouts. The EU’s case was further undermined when Societe Generale appealed its penalty in the courts.

HSBC fell 1 percent in London trading as of 1:04 p.m., while Credit Agricole slipped 0.5 percent in Paris.

JPMorgan and HSBC said in separate statements that they would defend themselves against the EU allegations.

“JPMorgan Chase has cooperated fully with the European Commission throughout its investigation,” the New York-based bank said in a statement. “The company believes that the statement of objections is without merit.”

Credit Agricole said in an e-mailed statement: “We shall examine the content as soon as we have received the documents.”

The three banks have an opportunity to respond to the antitrust complaint in writing and at a hearing.

By refusing to settle the case with the commission, JPMorgan, HSBC. and Credit Agricole forfeited the chance of a 10 percent discount on any fines, Joaquin Almunia, the EU’s antitrust chief, said at a press conference in Brussels today.

He declined to say whether any eventual penalties would be larger than for the banks that did a deal with the commission, saying antitrust fines reflect the share of the market affected by different cartel members as well as duration and gravity of violations.

Interdealer broker ICAP Plc also rejected a settlement last year in the yen Libor case. It faces a complaint in the “in the coming days or weeks” Almunia said, in reference to the London-based company.

Interdealer brokers act as go-betweens for banks that trade bonds, stocks, currencies, energy, and derivatives. ICAP didn’t immediately respond to calls seeking comment.


Manipulated Rates

The London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor) gauge banks’ estimated cost of borrowing over different periods of time. Libor is the benchmark interest rate for more than $360 trillion of securities.

In its appeal, Societe Generale said the commission made “a manifest error of assessment” in the way it calculated the bank’s sales and allocated the fines among the companies, according to details of the challenge published in the EU Official Journal last week.

In the wake of global probes into interest-rate manipulation, Almunia has also started an informal investigation into revelations that traders may have conspired to fix currency markets and oil and biofuel benchmarks.

Almunia said today that regulators are still sifting through a “huge” volume of information in its currency-manipulation investigation.

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