UPDATE 2-UK's ICAP told it might have broken EU antitrust rules over Libor

Tue Jun 10, 2014 9:40am EDT

* European Commission investigation focuses on yen Libor

* Says ICAP may have been involved in cartels as facilitator

* ICAP vows to defend itself vigorously (Adds detail, comments)

By John O'Donnell and Kirstin Ridley

BRUSSELS/LONDON, June 10 (Reuters) - The European Commission has told Britain's ICAP it might have broken antitrust rules by taking part in cartels that helped rig benchmark interest rates, the European Union's antitrust enforcer said on Tuesday.

The EU probe of ICAP is part of a global investigation into the manipulation of Libor and Euribor, central cogs in the financial system used to help price loans and swaps worldwide. Authorities have already fined 10 banks and brokerages $6.0 billion and charged 16 people.

By warning ICAP, the world's largest interdealer broker, that it might have fallen foul of antitrust rules, the European Commission is offering it a last chance to mount its legal defence in what could be one of the final chapters of the wider Libor investigation.

"The Commission has concerns that ICAP may have been involved in cartels concerning yen interest rate derivatives as a facilitator," it said in a statement.

ICAP, which has already been fined $87 million by U.S. and UK regulators and had three former brokers charged over allegations it helped fix yen Libor, denied it had breached EU competition law and vowed to defend itself.

It said the European Commission's so-called "Statement of Objections" alleged the brokerage had acted as a facilitator to help certain banks breach EU competition law in relation to yen Libor for "isolated periods" between 2007 and 2010.

"ICAP does not believe that it has breached any applicable EU competition law, and will defend itself against these allegations vigorously," it said in a statement.

ROTTEN APPLES

The brokerage, run by London businessman and former Conservative Party treasurer Michael Spencer, has called the former staff charged over the scandal "rotten apples" and promised to improve systems to ensure compliance with regulations.

EU antitrust regulators have already charged institutions over benchmark rigging. Earlier this year, five banks and one brokerage, including Europe's biggest bank HSBC, U.S. peer JPMorgan and France's Credit Agricole, admitted to setting up cartels that rigged yen-denominated derivatives.

ICAP, which refused to settle the European case in December, could face penalties of up to 10 percent of its global turnover if found guilty.

The company, which posted annual revenues of just under 1.4 billion pounds ($2.35 billion) in its last financial year, has said it has not set aside any funds for possible further fines.

Libor (London interbank offered rate) and its euro equivalent, Euribor, is used as a benchmark against which hundreds of trillions of dollars worth of products, from complex derivatives to personal mortgages, are priced worldwide.

Based on a survey of what banks would charge each other for short-term, unsecured loans, authorities allege traders colluded on answers that could nudge the reported rates by amounts that were tiny but translated into big profits.

Brokerages are paid for matching buyers and sellers of securities such as bonds, currencies and derivatives. But authorities have painted a picture of brokers passing information - and misinformation - between banks to help key trading clients influence rate calculations.

ICAP was the first brokerage sanctioned in the affair, although regulators have since fined smaller London based peer RP Martin. ($1 = 0.7345 Euros) ($1 = 0.5956 British Pounds) (editing by Robin Emmott and Tom Pfeiffer)

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