EU slaps record fines on banks for latest abuses
Brussels (AFP) - The European Union imposed a record 1.7 billion euros ($2.3 billion) in fines on six institutions on Wednesday for rigging key interest rates that affect vast sums of money around the world.
The sanction comes after several other massive penalties imposed on the world's biggest banks over the malpractices which have besmirched the reputation of the sector.
After boom years on Wall Street and in London, the financial crisis of 2008 has exposed various abuses by banks, including the reporting of false interest rates or the hiding of junk home loans in derivatives sold as high-quality assets.
On Wednesday, the European Union dredged out one more malpractice by the institutions, with German Deutsche Bank fined a total of 725 million euros for involvement in cartel rigging of both the European Euribor and Japanese Tibor rates.
French Societe Generale was fined 446 million euros for manipulating the European Euribor rate, while British bank RBS, already mired in controversy, was fined 391 million euros for involvement in cartels which rigged both rates.
The European Commission's anti-trust authorities had never previously imposed such big fines overall, Competition Commissioner Joaquin Almunia told a press conference.
"What is shocking is not only the manipulation of benchmark but (the) cartel," said Almunia, adding that the fine was meant to both "punish and dissuade".
The commission is now investigating the alleged rigging of the Swiss franc, and does not exclude "more investigations in the same area", said Alumnia.
It is "not the end of the story", he warned.
In total, four financial institutions were involved in a cartel which rigged the Euribor rate and six in a cartel which manipulated the Tibor rate.
In the Euribor case, British bank Barclays benefited from immunity and will not pay a fine because it revealed the existence of the rigging to the Commission.
Deutsche Bank was however fined 466 million euros, and Societe Generale and RBS were fined 131 million euros in the Euribor case.
Investigations are continuing concerning French bank Credit Agricole, HSBC of Britain and US bank JPMorgan.
In the Tibor case, Swiss bank UBS avoided a fine because it admitted the cartel misdoing to the Commission.
Deutsche Bank was fined 259 million euros, RBS 260 million euros, JPMorgan 80 million euros, US bank Citigroup 70 million euros and British broker RP Martin 247,000 euros in that case.
Deutsche Bank, Germany's biggest lender, said it had already accounted for the penalty in its reserves.
According to Wednesday's Sueddeutsche Zeitung newspaper, the bank has a share of more than 15-percent in the currency market.
Societe Generale, which said the fine would not affect its full-year target, blamed the rigging on "one employee" who "acted without the knowledge of his hierachy and the management of the bank".
The investigations and fines come after a separate scandal broke over the rigging of the London Libor rate, which is the benchmark rate that underpins the terms of $500 trillion of contracts ranging from mortgages to student loans around the world.
The Euribor, Tibor and Libor interest rates are calculated slightly differently but fulfil a vital function as a reference for the rates which banks are charging to lend each other.
