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Antitrust: Euro interest rate derivatives cartel?

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The European Commission has informed Crédit Agricole, HSBC and JPMorgan of its preliminary view that they may have breached EU antitrust rules by colluding to influence the pricing of interest rate derivatives denominated in the euro currency. The sending of a statement of objections does not prejudge the final outcome of the investigation.

Interest rate derivatives (e.g. forward rate agreements, swaps, futures, options) are financial products which are used by banks or companies for managing the risk of interest rate fluctuations. These products are traded worldwide and play a key role in the global economy. They derive their value from the level of a benchmark interest rate, such as the Euro Interbank Offered Rate (EURIBOR) for the euro.

The Commission has concerns that the three banks may have taken part in a collusive scheme which aimed at distorting the normal course of pricing components for euro interest rate derivatives. If established, such behavior violates Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the European Economic Area (EEA) Agreement that prohibit anti-competitive business practices.

In October 2011 the Commission had carried out unannounced inspections at the premises of several banks. In the course of its investigation the Commission imposed fines totaling € 1.04 billion on four banks active in the same sector in December 2013. These four banks had admitted their involvement in a cartel relating to euro interest rate derivatives, which allowed the Commission to settle the case with them. In return, the fines for these four banks were reduced by 10% (see IP/13/1208).

The Commission had also opened proceedings regarding Crédit Agricole, HSBC and JPMorgan in March 2013 and the investigation is continuing for them under the standard (non-settlement) cartel procedure.

Procedural background

A Statement of Objections is a formal step in Commission investigations into suspected violations of EU rules on restrictive business practices. The Commission informs the parties concerned in writing of the objections raised against them and the companies can examine the documents in the Commission’s investigation file, reply in writing and request an oral hearing to present their comments on the case before representatives of the Commission and national competition authorities.

If, after the parties have exercised their rights of defense, the Commission concludes that there is sufficient evidence of an infringement, it can issue a decision prohibiting the conduct and impose a fine of up to 10% of a company’s annual worldwide turnover.

Source: European Commission

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