EU Slaps Banks Over Swiss Market Collusion

(CN) - Four banks - including U.S.-based JPMorgan Chase - will fork over nearly $41 million to settle claims that they colluded to manipulate financial tools used to manage the interest rate risks, the European Commission said Tuesday.

The other banks involved are Royal Bank of Scotland, which tipped off regulators about the scheme, UBS and Credit Suisse.

According to the commission, between May and September 2007 the four banks agreed to quote other parties wider spreads between the buying and selling prices of short-term Swiss franc interest rate derivatives. Meanwhile, the banks also agreed to maintain narrower bid-ask spreads for their own trades with each other.

The scheme lowered the banks' own transaction costs while putting increased pressure on others in the market. But it also aimed to keep other players out of the Swiss franc derivatives market currently dominated by the four banks, regulators said.

RBS received immunity for alerting investigators to the scheme and will pay nothing per EU law. Chase and UBS received lower fines for cooperating with the commission, and will pay $13.3 million and $16 million, respectively.

Credit Suisse owes $11.6 million for its role in the cartel.

"Unlike in previous cartels we found in the financial sector, this one did not involve any collusion on a benchmark. Rather, the four banks agreed on an element of the price of certain financial derivatives," said antitrust commissioner Joaquin Almunia. "This way, the banks involved could flout the market at their competitors' expense. Cartels in the financial sector, whatever form they take, will not be tolerated."

Earlier this year, the commission announced a separate investigation into whether JPMorgan Chase and others colluded to manipulate the futures market by fixing the European Interbank Offered Rate benchmark interest rate, known as EURIBOR.

Other banks - including RBS, UBS and Credit Suisse - face similar investigations by EU regulators in the wake of the worldwide financial collapse in 2008.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit