Banks cooperate for lower fines in Euribor probe: sources

BRUSSELS Mon Jul 30, 2012 12:24pm EDT

Josef Ackermann, outgoing CEO of Germany's largest business bank, Deutsche Bank AG arrives for the bank's annual shareholders meeting in Frankfurt May 31, 2012. REUTERS/Alex Domanski

Josef Ackermann, outgoing CEO of Germany's largest business bank, Deutsche Bank AG arrives for the bank's annual shareholders meeting in Frankfurt May 31, 2012.

Credit: Reuters/Alex Domanski

BRUSSELS (Reuters) - Several banks under investigation for suspected rigging of euro interest rates are cooperating with EU antitrust regulators in the hope of lower fines, two people familiar with the matter said on Monday, a move which puts the lenders at a higher risk of lawsuits.

The decision by the banks to disclose more about their knowledge of possible manipulation of the Euro Interbank Offered Rate (Euribor) is effectively an admission of wrongdoing and illustrates growing nervousness that they face a heavy penalty.

The European Commission is investigating possible manipulation of Euribor, the benchmark used when pricing bank lending in euros.

The EU watchdog has not disclosed the names of the banks being investigated, which could face fines of up to 10 percent of their global revenues if found to have breached EU antitrust rules.

Earlier this month, sources told Reuters that Deutsche Bank, was already cooperating with the authorities. The lender had revenues last year of 33.2 billion euros.

"Several banks have come forward with information to the Commission," said one of the sources, who declined to be identified because of the sensitivity of the matter. This person declined to provide more details.

The second person said there could be at least two banks, besides Deutsche Bank, which have sought leniency under the European Commission's scheme to encourage whistleblowers.

The EU Commission spokesman for competition policy, Antoine Colombani, declined to comment.

U.S. and British authorities have already fined Barclays $453 million for manipulating Libor, a similar rate based on how much banks charge to lend to each other in other currencies including U.S. dollars and sterling.

More banks are expected to be drawn into the investigation into banks submitting false rates from which Libor is calculated daily.


Applicants to the European Commission for leniency, who in effect are admitting wrongdoing, could find themselves targeted by disgruntled investors, fund managers and investment funds, said Morten Nissen, a partner at law firm Bird & Bird.

"One of the things to take into consideration when applying for leniency is the increased risks of damages actions down the road," he said. "The facts will be described in the regulator's decision, that is where the risks are."

Barclays, Deutsche Bank, Citibank, Lloyds, HSBC, JP Morgan and RBS are some of the banks currently the subjects of lawsuits in the United States tied to Libor.

A total of 43 banks sit on the Euribor panel, which is hosted by the European Banking Federation. The rate is used as a reference for trillions of euros in euro-denominated loans and debt instruments.

Under the Commission's leniency policy, the whistleblower gets off scot-free. Fines can be reduced by 30 to 50 percent for the next company to provide evidence of wrongdoing, and by 20 to 30 percent for the following applicant. Subsequent applicants can get a reduction in any penalty of up to 20 percent.

To qualify, companies must provide what the regulator terms "significant added value" information.

The Commission is also investigating possible manipulation of the London Interbank Offered Rate (Libor) and the Tokyo Interbank Offered Rate (Tibor).

Regulators in the United States, Japan and Singapore are also investigating various interest rate benchmarks.

Thomson Reuters Corp is the British Bankers' Association's official agent for the daily calculation and publishing of Libor.

(Reporting by Foo Yun Chee; editing by Rex Merrifield, David Stamp and Anna Willard)

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Comments (2)
Fines will never stop bank fraud. Like it or not, Iran knows how to deal with big-time bank fraudsters.
BBC — Four people have been sentenced to death for their roles in Iran’s biggest-ever bank fraud scandal.
Two other defendants received life sentences, while 33 more will spend up to 25 years in jail, the chief prosecutor was quoted as saying.
The scandal involved forged documents reportedly used by an investment company to secure loans worth $2.6bn.

Jul 30, 2012 11:37am EDT  --  Report as abuse
Talkvent wrote:
So government’s give banks money so they can pay the country fines for frauds against the countries they are paying fines to. If I had no soul I would become a banker!

Jul 30, 2012 6:42pm EDT  --  Report as abuse
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