EU antitrust regulators will levy a record fine of at least 1.5 billion euros on six financial institutions, including Barclays and Royal Bank of Scotland, for rigging the yen Libor interest rate benchmark, a banking industry source said on Wednesday.
The world's top interdealer broker, ICAP, and Dutch cooperative bank Rabobank are among the firms that will be fined, the person said. The names of the other two financial institutions were not immediately clear.
Switzerland's UBS will not be fined because it was the first member of the group to come clean during the European Commission's investigation into wrongdoing, two sources familiar with the case confirmed to Reuters.
The yen Libor fines, likely to be the biggest so far to be handed out by Brussels, come on top of other penalties for a separate case involving the rigging of the Euribor benchmark interest rate, reported by Reuters on Tuesday.
Other regulators worldwide have also punished several banks and brokerages — including some of those to be fined by the European Commission — for misconduct.
EU antitrust chief Joaquin Almunia will announce the penalties next month, at the same time as fines for the rigging of the eurozone interest rate, dealing a blow to a system which allowed banks to determine the cost of borrowing.
"The total fine could be at least 1.5 billion euros ($2.02 billion)," the financial industry source told Reuters. That would beat the current record of 1.47 billion euro fine handed down to a cartel involved with cathode-ray tubes.
The London interbank offered rate (Libor) is a central cog in the global financial system, used as a benchmark for pricing hundreds of trillions of dollars worth of products.
The financial source said the group of banks had admitted to wrongdoing in yen Libor, the rate associated with the Japanese currency, in exchange for a 10 percent cut in the fine.
The fines, which can reach up to 10 percent of a company's global turnover, are nonetheless set to be significant.
RBS had a turnover of 25 billion pounds last year, while Barclays was 29 billion pounds and Rabobank 13.5 billion euros. ICAP's turnover was 1.47 billion pounds. RBS, Barclays, Rabobank, ICAP and UBS declined to comment.
The European Commission spokesman for competition policy, Antoine Colombani, declined to comment.
Almunia wants to hand out the fines by the end of the year, reinforcing his emerging legacy as a firm penalizer of banks' wrongdoing since the financial crisis struck five years ago.
His investigators say interest rate derivatives' traders colluded to rig the Libor and Euribor benchmarks, using advanced knowledge of the cost of borrowing to bolster their profits. Such cartels are illegal.
Libor is based on a survey of what banks would charge each other for loans. Other regulators have already found that traders colluded on answers that could nudge the reported rates by amounts that were tiny but translated into big profits.
© 2023 Thomson/Reuters. All rights reserved.