EU regulator fines banks $2.3 billion for benchmark rigging

European Union antitrust regulators on Wednesday fined six financial institutions including Deutsche Bank, the Royal Bank of Scotland (RBS) and Citigroup a total of $2.3 billion for manipulating financial benchmarks.

The penalty is the biggest yet to be handed down to banks for rigging the benchmarks used to determine the cost of lending, one of the most brazen violations of conduct since the financial crisis. It is also the highest antitrust penalty ever imposed by the commission, the EU's competition regulator.

The other banks penalized are Societe Generale, JPMorgan and brokerage RP Martin.

Deutsche Bank received the biggest fine, 725.4 million euros.

The European Commission said it would continue to investigate Credit Agricole, HSBC, JPMorgan and brokerage ICAP for similar offenses.

The benchmarks involved are the London interbank offered rate (Libor), the Tokyo interbank offered rate (Tibor) and the euro area equivalent (Euribor). They are used to price hundreds of trillions of dollars in assets ranging from mortgages to derivatives.

"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," EU Commission Vice President Joaquin Almunia said in a statement.

RP Martin and ICAP could not be immediately reached for comment. Deutsche Bank said it has set aside enough money to cover most of the 725 million euro fine.

JPMorgan confirmed its 79.9 million euro penalty in the Libor case but said it would defend itself in the Euribor case. Societe Generale declined to comment.

Unlike the six banks that admitted liability in return for a 10 percent reduction in their fines, Credit Agricole has refused to settle and will likely face sanctions next year. HSBC has also contested the EU's proposed penalty.

Both banks are expected to be formally charged on Wednesday.

A spokesman for HSBC said the bank would defend itself vigorously in the Euribor case. Barclays confirmed its cooperation with the commission, which helped it stave off a 690 million euro sanction.

RBS said its penalty of 391 million euros had been fully provisioned for.

Authorities around the world have so far handed down a total of $3.7 billion in fines to UBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges.

UBS paid a record fine of $1.5 billion late last year to the U.S. Department of Justice and the U.K.'s Financial Services Authority for rate rigging. UBS blew the whistle on the Libor and Tibor cases and as a result will not be fined.

EU fines can reach up to 10 percent of a company's global turnover.

Reuters