Vice President of the European Commission responsible for Competition Policy
Introductory remarks on cartels in the financial sector
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
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.
of European companies may use these products, for example if they have
a loan with a variable interest rate and want to hedge their risk. Those
that are active internationally may also want to protect themselves against
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
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
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
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
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