EU Court Scraps $37M Antitrust Fine Against HSBC

LUXEMBOURG (CN) – The European General Court ruled Tuesday that HSBC does not have to pay a $37 million fine brought by antitrust regulators who found that the London-based bank and several other financial institutions worked together to manipulate prices on the EU futures market.

The main courtroom at the European General Court. (Photo via EU Curia)

The European Union’s second highest court largely upheld the European Commission’s 2016 finding that HSBC violated competition laws, but annulled the fine for “insufficient reasoning.”

The European Interbank Offered Rate, or Euribor, is a benchmark interest rate based on the rates leading banks charge when loaning money to other banks overnight.

The commission carried out unannounced inspections of several banks in 2011, determining they had colluded to fix the Euribor.

Eight banks were eventually dealt fines totaling $2.34 billion, with Germany-based Deutsche Bank, Barclay’s, Royal Bank of Scotland and France’s Societe Generale receiving reduced fines of $1.5 billion when they agreed to settle the commission’s claims.

But HSBC, JPMorgan Chase and France’s Credit Agricole refused to settle, even after the commission determined they also operated a cartel that “distorted the normal course of pricing components for euro interest rate derivatives.”

That gamble paid off for HSBC, as the European General Court ruled Tuesday that regulators did not sufficiently explain why they decided on the penalty of $37 million.

The Luxembourg-based court specifically found that the commission did not address how it arrived at a certain “reduction factor” used to calculate the fine.

“The commission points out that it stated during the administrative procedure that the uniform reduction factor would be at least 97.5%. Those considerations do not provide the applicants with an explanation of the reasons why the reduction factor was set at 98.849% rather than at a higher level,” the ruling states. “Further, in the absence of a more detailed explanation of the reasons why those considerations led the reduction factor to be set at that precise level, the court is unable to conduct an in-depth review, in law and in fact, on a factor of the decision which could have had a significant effect on the amount of the fine imposed on the applicants.”

HSBC said in a statement that it is pleased with the court’s decision.

“We have consistently disputed that our actions constituted anti-competitive behaviour and are considering all aspects of the ruling and our legal options,” the bank told Reuters, hinting at an appeal of the finding that it committed antitrust violations.

The decision can be appealed to the European Court of Justice, the EU’s highest court.

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