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Tuesday, June 18, 2024 | Back issues
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EU Fines UK Broker $17M for Yen-Libor Tinkering

(CN) - British broker ICAP will pay a $17 million fine for breaking EU antitrust rules by helping to manipulate the yen benchmark interest rate, the European Commission said Wednesday.

The fine levied on ICAP follows a massive probe by EU regulators into banking-industry practices in the wake of the worldwide financial meltdown. In this case, involving Japanese yen interest rate derivatives, the commission uncovered seven bilateral agreements between banks to fix the London interbank offered rate, or Libor, as it was tied to the yen.

The other banks and brokers - UBS, RBS, Deutsche Bank, Citigroup, JPMorgan Chase and RP Martin - admitted their involvement and settled with the commission. Regulators slapped them with a combined $765 million fine in 2013.

But ICAP refused to admit wrongdoing, leading to an in-depth investigation by the commission. The EU's regulatory body uncovered that ICAP had facilitated six of the seven secret agreements by disseminating misleading predictions about where the yen's Libor rate would be set to nonparticipating banks.

The U.K.-based broker also used its contacts with nonparticipating yen-Libor panel banks to influence their benchmark submissions, and acted as a communications channel between traders at RBS and Citigroup to facilitate the cartel, the commission said.

In addition to the $17 million fine, regulators also invited any person or firm affected by the cartels to sue ICAP for damages. In the European Union, both Court of Justice case-law and antitrust regulations accept a commission decision as binding proof that infringement took place and was illegal.

"Today's decision to fine the broker ICAP sends a strong signal that assisting companies in their cartel activities has severe consequences," said competition policy commissioner Margrethe Vestager. "It marks the successful completion of our antitrust investigation in the yen interest rate derivatives sector - but not the end to our efforts to fight anticompetitive practices in financial markets."

ICAP called the commission's decision "wrong both in fact and in law," adding that it had already settled the matter with British and American regulators in 2013 to the tune of $87 million.

"This is a regulatory matter that has already been settled," the broker said in a statement. "It is not a competition issue, and the commission has presented no evidence that ICAP facilitated a competition law violation. ICAP will be challenging this decision at appeal in the European courts."

The Libor and Euribor benchmark interest manipulation scandals - and the commission's aggressive investigations into them - led EU lawmakers to criminalize market abuse and insider trading last year.

The new law takes effect in 2016.

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