Wednesday 21, December 2016 by Robin AmlĂ´t

Swiss regulator hands out fines totalling $96.5 million to international banks

The Swiss Competition Commission (COMCO) has closed its investigations related to the Swiss franc LIBOR benchmark, interest rate derivatives in yen and the Euro, and the bid-ask spread on Swiss franc (CHF) derivatives. While the regulator described the conclusion of these investigations as amicable settlements, it has handed out fines totalling CHF 99 million ($96.5 million). Interest rate derivatives (e.g. forward rate agreements, swaps, futures, options) are financial products used for managing the risk of interest rate fluctuations. They derive their value from the level of a benchmark interest rate, such as the London interbank offered rate (LIBOR) – which is used for various currencies. COMCO’s decisions can be appealed to the Swiss Federal Administrative Court.

Swiss franc LIBOR benchmark

COMCO reached the conclusion that the two international banks JPMorgan and Royal Bank of Scotland (RBS) operated, between March 2008 and July 2009, a bilateral cartel with the aim of influencing the Swiss franc LIBOR benchmark. Both banks signed an amicable settlement, approved by the COMCO on 14 December 2016. RBS received full immunity for revealing the existence of the cartel to the COMCO. JPMorgan was fined CHF 33.873 million after receiving a reduction of its fine for the cooperation in the investigation under the leniency programme. Simultaneously, the COMCO decided to discontinue the procedure against the two Swiss Interdealer/Cash Broker Cosmorex and Gottex Brokers. With these two decisions, the procedure Swiss franc LIBOR is terminated.

Between March 2008 and July 2009 RBS and JP Morgan tried to distort the normal course of the pricing of interest rate derivatives denominated in Swiss franc. They occasionally discussed the future Swiss Franc Libor rate submissions of one of the banks and at times exchanged information concerning trading positions and intended prices.

Yen LIBOR / Euroyen TIBOR cartels

COMCO found in the yen interest rate derivatives sector several distinct bilateral infringements of competition law, lasting between one and 10 months, in the period from 2007 to 2010. Four of the banks involved (Citigroup, Deutsche Bank, JPMorgan and Royal Bank of Scotland [RBS]) signed an amicable settlement, approved by the COMCO on 5 December 2016. COMCO imposed total fines of approximately CHF 14.4 million. The individual fines amount to CHF 3.779 million for Citigroup, CHF 5.027 million for Deutsche Bank, CHF 1.703 million for JPMorgan and CHF 3.926 million for RBS.

COMCO decided to discontinue the proceeding against the Japanese banks Mizuho, Sumitomo Mitsui and The Bank of Tokyo-Mitsubishi. The procedure continues against the banks HSBC, Lloyds, Rabobank and UBS, and against the Interdealer/Cash Brokers ICAP, RP Martin and Tullett Prebon. Furthermore, COMCO decided to discontinue the proceeding related to the Yen TIBOR benchmark against all parties.

The collusion in the Yen interest rate derivatives sector included discussions between traders of the participating banks on certain Yen LIBOR submissions. The traders involved also exchanged, on occasions, commercially sensitive information relating either to trading positions or to future Yen LIBOR submissions and in one of the infringements relating to certain future submissions for the Euroyen TIBOR (Tokyo interbank offered rate).

EURIBOR cartel

COMCO reached the conclusion that between September 2005 and May 2008 several banks participated, for different durations, in a cartel in interest rate derivatives in euro. Four of these banks (Barclays, Deutsche Bank, Royal Bank of Scotland [RBS] and Société Générale) signed an amicable settlement, approved by the COMCO on 5 December 2016.

Barclays and Deutsche Bank participated in the cartel for 32 months, Société Générale for 26 months and RBS for eight months. COMCO imposed total fines of approximately CHF 45.3 million. Deutsche Bank received full immunity for revealing the existence of the cartel to the COMCO. The other banks involved received reductions of their respective fines for cooperating with the investigation under the leniency programme. The individual fines amount to CHF 29.772 million for Barclays, CHF 12.332 million for RBS and CHF 3.254 million for Société Générale. The proceeding continues against BNP Paribas, Crédit Agricole, HSBC, JPMorgan and Rabobank.

The cartel aimed at distorting the normal course of pricing components for interest rate
derivatives in euro. Traders of different banks occasionally discussed their bank's submissions for the calculation of the EURIBOR as well as their trading and pricing strategies.

Swiss franc Spread cartel

COMCO reached the conclusion that the four international banks Credit Suisse, JPMorgan, Royal Bank of Scotland (RBS) and UBS operated a cartel on bid-ask Spread on Swiss franc interest rate derivatives between May and September 2007. These banks signed an amicable settlement, approved by the COMCO on 5 December 2016. COMCO imposed total fines of approximately CHF 5.4 million. UBS received full immunity for revealing the existence of the cartel to the COMCO. RBS and JPMorgan received reductions of their respective fines for cooperating with the investigation under the leniency programme. The individual fines amount to CHF 2.042 million for Credit Suisse, CHF 2.549 million for JPMorgan and CHF 0.856 million for RBS. With this decision, the proceeding Spread for Swiss franc interest rate derivatives is terminated.

COMCO’s investigation disclosed that between May and September 2007, Credit Suisse, JP Morgan, Royal Bank of Scotland (RBS) and UBS agreed to quote wider to third parties, fixed bid-ask spreads on certain categories of short term over-the-counter Swiss franc interest rate derivatives, whilst maintaining narrower spreads for trades amongst themselves.

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