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Europe concludes derivatives cartel investigations with €485 million in fines

The European Union has fined Crédit Agricole, HSBC and JPMorgan Chase a total of €485 million as it concludes a five year investigation into a cartel in euro interest rate derivatives. 07 Dec 2016

The banks colluded on euro interest rate derivative pricing elements and exchanged sensitive information in breach of the EU's antitrust rules, the Commission said.

The Commission reached a settlement regarding the same cartel in 2013 with Barclays, Deutsche Bank, the Royal Bank of Scotland and Société Générale, it said, but Crédit Agricole, HSBC and JPMorgan Chase chose not to settle at that time. The investigation therefore continued under the Commission's cartel procedure, it said.

Competition commissioner Margrethe Vestager said: “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 used by companies to manage the risk of interest fluctuations, or to speculate for gain. Their value is calculated based on a benchmark interest rate, such as the Euro Interbank Offered Rate (EURIBOR), or the Euro Over-Night Index Average (EONIA) for euro interest rate derivatives.

The Commission found that participating traders of the banks were in regular contact through corporate chat-rooms or instant messaging services between September 2005 and May 2008.

"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 Commission said.

Crédit Agricole was fined €114.7m for five months involvement in the cartel, JPMorgan Chase €337.2m, also for five months, and HSBC €33.6m for one month.