Swiss Competition Commission Fines 7 Banks CHF 99 Million For Rigging Rates; More To Follow

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The Swiss competition commission (COMCO) recently announced a string of fines for global banking giants, as it concluded some of its investigations into the their role in manipulating benchmark interest rates between 2006 and 2010. [1] The financial regulator has been investigating into five distinct cartels – those involved in rigging the Swiss franc LIBOR, Yen LIBOR, Euroyen TIBOR, EURIBOR, and spreads on Swiss franc interest rate derivatives – since 2013, and the announced fines of CHF 99 million ($97 million) stem from settlements with seven major banks. JPMorgan (NYSE:JPM) attracted the largest fine amount of CHF 38.1 million ($37 million) followed by a fine of CHF 29.8 million ($29 million) for Barclays (NYSE:BCS) and CHF 17.1 million ($16.7 million) for RBS (NYSE:RBS).

COMCO is still looking into seven banks and three brokerage firms, because of which the total fine figure from the Swiss regulator may increase to CHF 200 million by the time the regulator winds up its investigations. However, the expected total fine figure dwarfs in comparison to total fines of €2.21 billion ($2.38 billion) imposed by the European Commission on these financial institutions for rigging benchmark interest rates (see European Commission Finalizes Rate-Rigging Fines For Crédit Agricole, HSBC and JPMorgan). As the fine amounts are not material for these banking giants, and most of them have likely set aside legal provisions for them, they are unlikely to have an impact on results for any of the banks.

 

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As a part of its investigation into the rate-rigging scandal, the Swiss Competition Commission divided the banks into five cartels based on their involvement in determining the Swiss franc LIBOR, Yen LIBOR, Euroyen TIBOR, EURIBOR and also the bid-ask spread on Swiss franc interest rate derivatives. The fine applicable to each bank was determined by first identifying the extent of their involvement in manipulating the benchmark rates, and then waiving some (and in some cases all) of the fine amount to arrive at the final amount.

The table below summarizes the fines imposed by the COMCO on individual firms and also highlights which of the cartels each of them was included in. “CHF rate” represents the cartel that manipulated Swiss franc LIBOR. [2] “CHF derivative” is the group that rigged bid-ask spread on Swiss franc interest rate derivatives. [3] Manipulation of the Yen LIBOR and Euroyen TIBOR fall under “Yen-related.” [4] EURIBOR rigging is shown as “Euro-related.” ((COMCO fines banks for participating in the EURIBOR cartel, COMCO Press Releases, Dec 21 2016)).

SwissReg_RateRiggingFines

In the table above, a ‘-‘ for a particular firm indicates that it was not being investigated by the COMCO as a part of the corresponding cartel. The cells shaded in green are for firms that were let off without a fine for their role as a whistle-blower. The cells shaded yellow should help identify the firms against which COMCO’s investigation continues, with a potential fine likely in the near future.

Notably, UBS, RBS and Deutsche Bank escaped without fines because of their cooperation in the investigation for specific cartels. RBS and JPMorgan are the only two banks that were investigated for their role in all cartels. Also, the fines for EURIBOR manipulation are expected to be the highest – something that can be attributed to the fact that euro benchmark rates are used much more widely across the globe. With 5 banks still being investigated as a part of the EURIBOR cartel, we believe that the total fines in this category could reach CHF 150 million by the time COMCO is through with all investigations.

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Notes:
  1. COMCO Press Releases, Dec 21 2016 []
  2. COMCO fines Swiss franc LIBOR cartel, COMCO Press Releases, Dec 21 2016 []
  3. COMCO fines Swiss franc Spread cartel, COMCO Press Releases, Dec 21 2016 []
  4. COMCO fines banks for participating in Yen LIBOR / Euroyen TIBOR cartels, COMCO Press Releases, Dec 21 2016 []