The European Union has imposed a record 1.7 billion euros ($A2.5 billion) in fines on six institutions for rigging key interest rates that affect vast sums of money around the world.
The sanction comes after several other massive penalties imposed on the world’s biggest banks over the malpractices which have besmirched the reputation of the sector.
After boom years on Wall Street and in London, the financial crisis of 2008 has exposed various abuses by banks, including the reporting of false interest rates or the hiding of junk home loans in derivatives sold as high-quality assets.
On Wednesday, the European Union dredged out one more malpractice by the institutions, with German Deutsche Bank fined a total of 725 million euros for involvement in cartel rigging of both the European Euribor and Japanese Tibor rates.
French Societe Generale was fined 446 million euros for manipulating the European Euribor rate, while British bank RBS, already mired in controversy, was fined 391 million euros for involvement in cartels which rigged both rates.
The European Commission’s anti-trust authorities had never previously imposed such big fines overall, competition commissioner Joaquin Almunia told a press conference.
“What is shocking is not only the manipulation of benchmark but (the) cartel,” said Almunia, adding that the ruling was meant to both “punish and dissuade”.
With further investigations ongoing, he warned that it is “not the end of the story”.
In total, four financial institutions were involved in a cartel which rigged the Euribor rate and six in a cartel which manipulated the Tibor rate.
In the Euribor case, British bank Barclays benefited from immunity and will not pay a fine because it revealed the existence of the rigging to the Commission.
Investigations are continuing concerning French bank Credit Agricole, HSBC of Britain and US bank JPMorgan.
In the Tibor case, Swiss bank UBS avoided a fine because it admitted the cartel misdoing to the Commission.
As well as Deutsche Bank and RBS, JPMorgan was fined 80 million euros, US bank Citigroup 70 million euros and British broker RP Martin 247,000 euros in the Tibor case.
The investigations and fines come after a separate scandal broke over the rigging of the London Libor rate, which is the benchmark rate that underpins the terms of $US500 trillion of contracts ranging from mortgages to student loans around the world.
The Euribor, Tibor and Libor interest rates are calculated slightly differently but fulfil a vital function as a reference for the rates which banks are charging to lend each other.