Econintersect: Banks around the globe could end up with massive fines if maximum penalties are imposed for involvement in the LIBOR (London Interbank Offered Rate) rate fixing scandal, according to a report in Der Spiegel. And Brussels suspects that "cartels" (The Telegraph) were involved in fixing interest rates, not only for LIBOR but also for other international interest rate references such as EURIBOR (Euro Interbank Offered Rate). The European Commision action differs from what has been occurring in London and the U.S., where individual banks have been making settlements with regulators. The EU is going after the "mob."
The European approach may take longer than that being pursued in the UK and the U.S.. From Spiegel Online:
US and UK regulators have already fined three banks including Barclays and UBS. RBS settled with US and UK authorities this month, paying a $612 million fine and admitting to manipulating yen, US dollar and Swiss franc LIBOR rates. German regulators have also been looking into Deutsche Bank's involvement in the scandal. The EU's approach of going after cartels, by contrast, could take years.
The FT reports that Europe may consider settling with banks, but not while some refuse to cooperate with investigators.
"We suspect the existence of cartels between certain actors in the market for derivative products -- banks, but also brokers," said Almunia in the wake of the RBS settlement agreement. "These possible anti-competitive agreements consisting of manipulating rates could have allowed participants to make unfair additional profits on their market transactions.
Alumin is European Commissioner Joaquin Almunia.
According to Spiegel Online, the eventual cost to each bank involved could be as much as 30% of annual revenue to pat the EU imposed fines and penalties.
- Turning Up the Heat: Banks Could Face Massive Fines over LIBOR Scandal (Spiegel Online, 22 February 2013)
- Brussels suspects cartels involved in rate-fixing (Rachel Cooper, The Telegraph, 22 February 2013)