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Deutsche Bank AG and Royal Bank of Scotland Group Plc are among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union for rigging rates linked to Libor.
Deutsche Bank was fined 725 million euros, the biggest penalty in the case. Societe Generale SA was fined 446 million euros, RBS must pay 391 million euros, and JPMorgan Chase & Co. will pay 80 million euros, the EU said in a statement. The combined fines for manipulating the yen London interbank offered rate and Euribor are the largest-ever EU cartel penalties.
“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 Competition Commissioner Joaquin Almunia said in the statement today.
While global fines for rate-rigging topped $3.7 billion before today, the cost to banks may climb as they face lawsuits worldwide. An EU accord includes a finding of liability that can be used in civil cases.
Citigroup Inc. has a 70 million-euro penalty and RP Martin Holdings Ltd. was fined 247,000 euros.
UBS AG and Barclays Plc weren’t fined because they were the first to inform the EU of the cartels. UBS avoided a potential 2.5 billion-euro fine and Barclays escaped a 690 million-euro penalty. Citigroup also avoided an extra 55 million-euro fine for blowing the whistle on one part of the cartel, the EU said in the statement.
JPMorgan, HSBC Holdings Plc and Credit Agricole SA pulled out of the Euribor settlement and ICAP Plc withdrew from the Libor negotiations. All four companies continue to face an antitrust investigation, the EU said.
Credit Agricole Chief Executive Officer Jean-Paul Chifflet said last month that he rejected a deal related to Euribor rates because it would have “put into question our responsibility.”
Deutsche Bank, based in Frankfurt, said the fine “reflects, in particular, the high market share held by Deutsche Bank in the markets investigated.”
“The settlement relates to past practices of individuals which were in gross violation of Deutsche Bank’s values and beliefs,” Juergen Fitschen and Anshu Jain, co-chief executive officers, said in an e-mailed statement.
Deutsche Bank’s fine is still topped by the EU’s highest-ever cartel penalty for a single company when Cie. de Saint Gobain SA was ordered to pay 880 million euros for plotting with rivals to fix the price of windows sold to car manufacturers.
The combined fines set a new record, exceeding 1.47 billion euros levied last year on Royal Philips Electronics NV and nine others for a TV parts cartel.
Citigroup is “pleased to resolve this matter with the European Commission and to put this investigation behind us,” the New York-based bank said in an e-mailed statement.
Libor probes could cost global investment banks $46 billion and investigations into manipulating currencies could trigger another $26 billion, said analysts at KBW, a unit of Stifel Financial Corp., in a report last month. Libor manipulation has also resulted in civil suits, including a U.S. lawsuit by Fannie Mae, the U.S. government-owned mortgage-financing company, alleging that nine banks’ rigging cost it about $800 million.
Deutsche Bank set aside an extra 1.2 billion euros in October to cover potential legal costs, increasing to 4.1 billion euros its reserves to cover litigation. The bank said in October that it may receive “significant financial penalties and other consequences” as a result of investigations into Libor manipulation, according to a quarterly report.
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