European Commission Fines Three Banks €485 Million For Derivatives Cartel


The European Commission said Wednesday it has fined Crédit Agricole, HSBC and JPMorgan Chase, a total of €485 million for participating in a cartel in euro interest rate derivatives.

According to the European Commission, the banks colluded on euro interest rate derivative pricing elements, and exchanged sensitive information, in breach of EU antitrust rules.

Crédit Agricole, HSBC and JPMorgan Chase chose not to settle this cartel case with the Commission, unlike Barclays, Deutsche Bank, RBS and Société Générale, with whom the Commission reached a settlement concerning the same cartel in December 2013. Since then, the investigation has continued under the Commission’s standard cartel procedure.

Today’s decision marks the end of a cartel investigation that was the first of several in the financial services sector.

According to Commissioner Margrethe Vestager, in charge of competition policy,  “A sound and competitive financial sector is essential for investment and growth. Banks have to respect EU competition rules just like any other company operating in the Single Market.”

Interest rate derivatives are financial products such as forward rate agreements, interest rate swaps or interest rate options, which are used by companies to manage the risk of interest rate fluctuations or for speculation. They derive their value from the level of a benchmark interest rate, such as the Euro Interbank Offered Rate (EURIBOR) and/or the Euro Over-Night Index Average (EONIA) for euro interest rate derivatives. The EURIBOR benchmark interest rate is meant to reflect the cost of interbank lending in euros and is based on individual quotes submitted daily by a panel of banks to a calculation agent.

The Commission’s investigation found that there was a cartel in place between September 2005 and May 2008, involving a total of seven banks (Barclays, Crédit Agricole, HSBC, JPMorgan Chase, Deutsche Bank, RBS and Société Générale) over varying time periods. It covered the whole European Economic Area (EEA).

According to the European Commission, the participating traders of the banks were in regular contact through corporate chat-rooms or instant messaging services. The traders’ aim was to distort the normal course of pricing components for euro interest rate derivatives. They did this by telling each other their desired or intended EURIBOR submissions and by exchanging sensitive information on their trading positions or on their trading or pricing strategies.

This means that the seven banks colluded instead of competing with each other on the euro derivatives market, the European Commission This market is very important not only to banks but also to many companies in the Single Market, which use euro interest rate derivatives to hedge their financing risk.

Wednesday’s Commission decision fines Crédit Agricole, HSBC and JPMorgan Chase for their participation in this cartel. This follows a settlement reached with Barclays, Deutsche Bank, RBS and Société Générale in the same cartel in December 2013.

The anti-competitive practices concerning benchmark interest rates revealed through antitrust enforcement have also been addressed by a more stringent regulatory framework. In June 2016, the European Parliament and the EU’s Council of Ministers adopted a new Regulation on benchmarks, following a proposal by the Commission. The Regulation makes it a violation of capital markets rules to manipulate benchmarks, such as EURIBOR, and reinforces the investigative and sanctioning powers of financial regulators.

As for the settling banks, the fines for Crédit Agricole, HSBC and JPMorgan Chase were set on the basis of the Commission’s 2006 Guidelines on fines.

In setting the level of fines, the Commission took into account the banks’ value of sales for the products concerned within the EEA, the very serious nature of the infringement, its geographic scope and its duration.

The fines imposed for the three banks are as follows:

Participants Duration of participation Fine (€)
Crédit Agricole 5 months 114,654,000
HSBC 1 month 33,606,000
JPMorgan Chase 5 months 337,196,000


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