EU Imposes 1.7 Billion Euros in Fines Over Rate

Yves Herman/Reuters

The European Union has fined a group of global financial institutions, including for the first time two American banks, a combined 1.7 billion euros to settle charges they colluded to fix two benchmark interest rates.

The settlement, worth about $2.3 billion and announced by European Union antitrust officials on Wednesday, relates to actions by traders at some of the world's largest banks, including Citigroup, Royal Bank of Scotland and Deutsche Bank. The banks were accused of fixing rates for the London interbank offered rate, or Libor, as it relates to the Japanese yen and the euro interbank offered rate, or Euribor.

'The commission is determined to fight these cartels in the financial sector,' Joaquín Almunia, the European Union's competition commissioner, said at a news conference in Brussels.

The penalties come after five financial institutions, including Barclays, R.B.S. and UBS, previously admitted wrongdoing and agreed to pay more than $3 billion combined to regulators in the United States, Britain and Switzerland over collusion to fix the Libor rate.

European Union antitrust authorities were not part of those previous settlements and conducted their own investigation.

The agreement marks the first time that two American institutions, Citigroup and JPMorgan Chase, will pay penalties in the rate-fixing investigations.

Barclays and UBS, which alerted European Union officials to the improper practices, will avoid fines as part of the settlement. Citigroup, which will pay a total of €70 million in fines, avoided an additional €55 million penalty by cooperating with investigators.

The banks that agreed to settle received a 10 percent reduction in the total amount of fines they could have faced, European Union officials said.

'Those who have settled today have recognized their wrongdoing,' Mr. Almunia said. 'Those who have not settled are not ignorant to what we know. It's up to them to decide what to do.'

The penalty exceeds a €1.47 billion fine levied last year against seven companies for collusion in the manufacturing of cathode-ray tubes for computer monitors and televisions.

The banks that reached settlements related to Euribor are: Barclays, Deutsche Bank, R.B.S. and Société Générale. The improper activity took place from September 2005 to May 2008, officials said.

Mr. Almunia said that the antitrust regulators had opened investigations of HSBC, JPMorgan and Crédit Agricole related to Euribor.

The banks that reached settlements related to yen Libor are: UBS, R.B.S., Deutsche Bank, JPMorgan and Citigroup. The British broker RP Martin Holdings also agreed to a fine over yen Libor. The improper activity took place from 2007 to 2010, officials said.

The European Union has also opened an investigation regarding yen Libor against the British financial firm ICAP, which has already agreed to pay British and American authorities $87 million related to the Libor rate fixing.

To set the Libor and Euribor rates, banks submit the rates at which they would be prepared to lend money to each other, on an unsecured basis, in various currencies and varying maturities. Those rates are averaged, after the highest and lowest ones are eliminated, and that becomes that day's rate.

R.B.S. said on Wednesday that it had undertaken efforts, since it first became aware in 2011 of the improper conduct, to improve its systems and controls regarding Libor and other benchmark rates.

'We acknowledged back in February that there were serious shortcomings in our systems and controls on this issue, but also in the integrity of a very small number of our employees,' said Philip Hampton, R.B.S. chairman.

'Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue,' Mr. Hampton said. 'The R.B.S. board and new management team condemn the behavior of the individuals who were involved in these activities. There is no place for it at R.B.S.'

Jürgen Fitschen and Anshu Jain, the co-chief executives of Deutsche Bank, said in a statement: 'The settlement relates to past practices of individuals which were in gross violation of Deutsche Bank's values and beliefs.'

HSBC declined to comment. Société Générale, Crédit Agricole, RP Martin and ICAP didn't immediately respond to requests for comment on Wednesday.

'We are pleased to resolve this matter with the European Commission and to put this investigation behind us,' Citigroup said in a statement. 'Citi continues to cooperate with other regulators in connection with investigations and inquiries related to various interbank offered rates and other benchmark rates.'

This post has been revised to reflect the following correction: Correction: December 4, 2013

An earlier version of this article and its headline misstated the number of banks fined by the European Commission in connection with an interest rate-rigging settlement. The commission settled with eight financial institutions, seven of them banks, not eight banks.