04/12/2013 07:55 GMT | Updated 23/01/2014 18:58 GMT

RBS, Barclays Among Banks Fined €1.7 Billion For Rigging Interest Rates

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Royal Bank of Scotland and Barclays are among a raft of global banking giants involved in a record 1.7 billion euro (£1.4 billion) settlement with European regulators in the latest rate-rigging crackdown.

Eight banks have agreed penalties with the European Commission over allegations they formed cartels to fix two key benchmark interest rates used to set the price of trillions of dollars of financial products, from mortgages to complex financial products.

RBS will pay 391 million euros (£325 million) for its role in the attempted rigging of the Yen Libor and Euribor - the Tokyo and euro area equivalents of the London interbank offered rate (Libor).


But Barclays is immune from a potential 690 million euro (£573 million) penalty after blowing the whistle on the Euribor cartel. The sanctions - the first from the EC on rate manipulation - are the highest yet for European antitrust enforcement.

Barclays and state-backed RBS have already been fined following an investigation into the rigging of Libor, paying penalties of £290 million and £391 million respectively.

Other banks fined by the EC in the Euribor case are German group Deutsche Bank and French player Societe Generale.

Those involved in the Yen Libor case are RBS, Swiss group UBS, Deutsche Bank, US giants JPMorgan Chase & Co and Citigroup and UK-based wholesale broker RP Martin.

UBS avoided a hefty 2.5 billion euro (£2.1 billion) fine after flagging up the Yen Libor cartel with the EC. Fellow British bank HSBC is understood to have pulled out of the Euribor settlement talks, alongside US group JPMorgan Chase & Co and French group Credit Agricole, while broker ICAP is said to have refused settlement in the Yen Libor probe.

The EC said cartel investigations involving these firms will continue.

Joaquin Almunia, EC vice-president in charge of competition policy, said: "What is shocking about the Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.

"Today's decision sends a clear message that the commission is determined to fight and sanction these cartels in the financial sector."

The EC sanctions serve as the latest reminder of wrongdoing in the industry, which has been left reeling following a series of scandals in recent years.

Authorities worldwide have so far fined UBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges.

UBS has paid the largest penalty yet in the clampdown, fined 1.5 billion US dollars (£917 million) late last year.

But Barclays was the first to settle and suffered a major reputational blow, which claimed the scalp of former chief executive Bob Diamond and has led to a major overhaul of practices and culture in the bank.

Barclays said it "voluntarily" reported the Euribor cartel to the EC and "co-operated fully" with the investigation.

Sir Philip Hampton, chairman of RBS, said the bank's bosses "condemn the behaviour" of those involved in attempted rate rigging.

He said: "We acknowledged back in February that there were serious shortcomings in our systems and controls on this issue, but also in the integrity of a very small number of our employees.

"Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue."

Since its Libor-fixing settlement earlier this year, RBS has overhauled its systems and controls, while putting in place an independent rate-setting team with all submissions overseen by a review board.