The European Union’s top antitrust enforcer said his priority was investigating banks’ “shocking” attempts to rig interbank lending rates.
“This sort of collusion can seriously harm competition worldwide and on our continent,” EU Competition Commissioner Joaquin Almunia said in the text of a speech in Lisbon today. “If our concerns are confirmed, we will take the necessary actions to bring these practices to an end and prompt a change of culture in the banking sector.”
Confidence in the London interbank offered rate, or Libor, a benchmark for financial products valued at 360 trillion dollars worldwide, has been dented by Barclays Plc (BARC)’s admission that it submitted false rates. Robert Diamond, who resigned as London-based Barclays’s CEO after the bank was fined 290 million pounds ($448 million), told British lawmakers last week that other banks also lowballed Libor submissions.
The European Commission is investigating several banks over manipulation of the London, euro and Tokyo interbank lending rates for several currencies, Almunia said. The probes focus on suspected cartel arrangements for derivatives linked to the benchmark rates, including possible collusion over the setting of the rates, he said.
“The story is quite shocking and brings us back to the banking industry’s most irresponsible behavior,” Almunia said. He started two separate probes last year into Goldman Sachs Group Inc., JPMorgan Chase & Co. and other investment banks over agreements in the market for credit default swaps.
The commissioner said three types of agencies are investigating the inter-bank rates with the EU focusing on an antitrust probe. The U.S. Department of Justice’s fraud division is probing fraud and other criminal conduct, while financial regulators such as the U.K. Financial Services Authority and the U.S. Commodity Futures Trading Commission are examining breaches of financial rules.
The commission, the EU’s executive arm, proposed separately to make it a crime under EU law to manipulate such rates. Regulators are also examining alternatives to the ways the way the rates are set.
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