Banks and broker-dealers ensnared in the Libor-rigging scandal are facing fresh pressure to settle with Europe's top competition authority as it expands the scope of its probes.
The European Commission's 18-month antitrust investigation, previously known to include yen and euro interbank rates, has been extended to include Swiss franc-denominated swaps and poses a significant regulatory threat to the financial institutions under scrutiny, according to people familiar with the probe.
The commission can impose a maximum penalty equivalent to 10 per cent of a company's global turnover for each cartel it is found to be involved with. A bank implicated in all three rate-fixing cases could, for example, face fines of up to 30 per cent of total revenues.
(Read More: Recent Libor Settlements Are Just Tip of the Iceberg)
In a speech on Friday in Paris, the EU's competition commissioner will stress his determination to pursue the cases and ensure competition enforcement complements actions of global authorities against misconduct and corruption.
Joaqun Almunia's speech is intended as a warning to financial institutions that are holding out against antitrust authorities. According to people involved in the probe, Brussels is informally exploring the potential for settlements, but some companies are unwilling to open discussions over what they consider to be unfounded allegations of wrongdoing.
At least a dozen banks and interdealer brokers are potentially under the spotlight of the three separate EU probes, according to regulatory findings and Financial Times investigations. While US and UK financial regulators have already fined three banks including Barclays and UBS over rigging interbank lending benchmarks, only Royal Bank of Scotland has so far admitted to breaking antitrust rules in a settlement with the US Department of Justice.
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Unlike US antitrust regulators, Brussels will not settle with individual cartel members and only concludes cases simultaneously with all groups involved – a process that typically takes several years.
Socit Gnrale and Crdit Agricole were drawn into the benchmark-rigging scandal when the Financial Times reported last summer that employees at the banks communicated with a Barclays euro swaps trader, Philippe Moryoussef, who formerly worked at SocGen.
In its findings against Barclays in June, the US Commodity Futures Trading Commission alleged that Mr Moryoussef – who was identified only as "a trader" in the report – "orchestrated an effort to align trading strategies among traders at multiple banks". Traders at Deutsche Bank, HSBC and Rabobank also communicated with Mr Moryoussef.
RBS became the third bank to settle with US and UK authorities this month, paying $612 million and admitting to attempted manipulation of yen, US dollar and Swiss franc Libor rates. According to anonymised regulatory filings, a trader at JPMorgan Chase communicated with one of his former colleagues at RBS.
A footnote in the CFTC's findings revealed that RBS also had Euribor issues limited to another trader. People familiar with the investigation said the trader, who moved from Barclays to RBS, is Mr Moryoussef.
UBS paid a record $1.5 billion fine in December, and Barclays paid $450 million in June to settle US and UK investigations. Criminal probes by the US DoJ and UK's Serious Fraud Office continue.
The DoJ charged two former UBS traders including Tom Hayes, who later worked for Citibank. Mr Hayes is charged with a price-fixing violation as well as conspiracy. A British citizen, he was previously arrested by the SFO in connection with its own Libor inquiry, along with two RP Martin brokers he dealt with. Mr Hayes has not yet responded to the allegations.
The DoJ's findings allege that Mr Hayes, a star trader of yen derivatives, communicated with bankers at Deutsche Bank, RBS and JPMorgan and asked brokers at RP Martin and ICAP to encourage other banks to submit rates that would favour his trading book.
Although the commission has not identified any banks or interdealer brokers implicated in its current investigations, in past decisions it has fined the facilitators of cartels.