Summary of Commission Decision

of 7 December 2016

relating to a proceeding under Article 101 of the TFEU and Article 53 of the EEA Agreement

(Case AT.39914 — Euro Interest Rate Derivatives)

(notified under document C(2016) 8530)

(Only the English and French texts are authentic)

(2019/C 130/05)

On 7 December 2016, the Commission adopted a decision relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union (the ‘Treaty’) and Article 53 of the Agreement on the European Economic Area (the ‘EEA Agreement’). In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets. A non-confidential version of the decision is available on the Competition Directorate-General website at the following address:

http://ec.europa.eu/competition/antitrust/cases/

1. INTRODUCTION

(1) The addressees of the Decision participated in a single and continuous infringement of Article 101 of the Treaty and Article 53 of the EEA Agreement. The object of the infringement was the restriction and/or distortion of competition in the sector of Euro Interest Rate Derivatives linked to the Euro Interbank Offered Rate (‘Euribor’) and/or the Euro Over-Night Index Average (‘EONIA’) (hereinafter ‘EIRD’ or ‘EIRDs’).

(2) The Euribor is a benchmark interest rate intended to reflect the cost of interbank lending in Euros which is widely used in the international money markets. The Euribor is defined as an index of ‘the rate at which Euro interbank term deposits are offered by one prime bank to another prime bank within the euro zone’ ( 2 ) and it is based on the panel banks' individual quotes of the rates at which each of them believes that a hypothetical prime bank would lend funds to another prime bank ( 3 ) . Indeed, according to the European Banking Federation's Euribor Code of Conduct, ‘panel banks provide daily quotes of the rate (…) that each panel bank believes one prime bank is quoting to another prime bank for interbank term deposits within the euro zone’ ( 4 )

(3) The Euribor is calculated ( 5 ) on the basis of submissions by participating ‘panel banks’ ( 6 ) sent on every trading day between 10.45 a.m. and 11.00 a.m. Brussels time to Thomson Reuters, which serves as the calculation agent to the European Banking Federation (‘EBF’). Each panel bank has submitters which are responsible for proposing the quote submissions on behalf of the given panel bank. Submitters operate normally within the treasury department of the given panel bank. The Euribor is determined and published at 11.00 a.m. each business day Brussels time (10.00 a.m. London time). Each panel bank provides a contribution for each of the 15 different Euribor interest rates (one for each maturity ranging from one week to 12 months — referred to as ‘tenors’).

(4) The Euribor does not have an overnight tenor. This role is taken by the EONIA which is an overnight interest rate computed with the help of the European Central Bank as a weighted average of all overnight unsecured lending transactions in the interbank market. The banks contributing to EONIA are the same as the panel banks contributing to Euribor.

(5) The different Euribor tenors (such as 1 month, 3, 6 or 12 months) serve as pricing components for Euribor-based EIRDs. For EIRDs, the respective Euribor tenor which is maturing or resetting on a specific date may affect either the cash flow a bank receives from the counterparty to the EIRD, or the cash flow a bank needs to pay to the counterparty on that date. Depending on the trading positions/exposures entered into on its behalf by its traders, a bank may either have an interest in a high Euribor fixing (when it receives an amount calculated on the basis of Euribor), a low fixing (when it needs to pay an amount calculated on the basis of Euribor) or to be ‘flat’ (when it does not have a significant position in either direction).

(6) Euribor rates are, inter alia, reflected in the pricing of EIRDs, which are globally traded financial products used by corporations, financial institutions, hedge funds, and other undertakings to manage their interest rate risk exposure (hedging, for both borrowers and investors) or for speculation purposes ( 7 ) . The most common basic EIRDs are: (i) forward rate agreements; (ii) interest rate swaps; (iii) interest rate options; and (iv) interest rate futures. EIRDs may be traded over the counter (‘OTC’) or, in the case of interest rate futures, through exchanges.

(7) The Decision is addressed to (hereinafter ‘the addressees’): — Crédit Agricole SA, Crédit Agricole Corporate and Investment Bank (together referred to as ‘Crédit Agricole’), — HSBC Holdings plc, HSBC Bank plc, HSBC France (together referred to as ‘HSBC’), and — JPMorgan Chase & Co., JPMorgan Chase Bank, National Association, J.P. Morgan Services LLP (together referred to as ‘JPMorgan Chase’).

(8) Crédit Agricole, HSBC and JPMorgan Chase have been Euribor panel banks during the whole period of their respective involvement in the infringement.

2. CASE DESCRIPTION

2.1. Procedure

(9) The case was opened on the basis of an immunity application from […] on 14 June 2011. Following inspections by the European Commission (‘Commission’) at the premises of various banks in October 2011, three other banks […] cooperated with the Commission investigation. They voluntarily submitted more evidence to the Commission and applied for reduction of fines under the Commission's leniency programme ( 8 ) . The three banks that are subject to the current decision did not actively cooperate with the Commission investigation under the leniency programme.

(10) The Commission initiated proceedings in March 2013, pursuant to Article 11(6) of Regulation (EC) No 1/2003, against seven banks […] and invited them to settle their case.

(11) […] submitted settlement submissions, on the basis of which the Commission adopted Commission Decision C(2013) 8512 of 4 December 2013, amended on 6 April 2016 […], and impose fines for a total amount of EUR 824 583 000 on these four banks.

(12) Crédit Agricole, HSBC and JPMorgan Chase did not submit a settlement submission. The Commission continued the investigation in their regard, and carried out an announced inspection at JPMorgan Chase in February 2014. The Commission issued a Statement of Objections against Crédit Agricole, HSBC and JPMorgan Chase on 19 May 2014. They replied to the Statement of Objections and an Oral Hearing was organised in June 2015.

(13) The Advisory Committee on Restrictive Practices and Dominant Positions was consulted and gave a positive opinion on 28 November and 5 December 2016, the Hearing Officer issued his final report on 5 December 2016, and the Commission adopted the decision on 7 December 2016.

2.2. Description of the conduct

(14) The infringement in the present case takes the form of a cartel covering Euro interest rate derivatives (‘EIRDs’) which are linked to the Euro Interbank Offered Rate (‘Euribor’) and/or the Euro Over-Night Index Average (‘EONIA’). The most common EIRDs are forward rate agreements, interest rate swaps, interest rate options and interest rate futures. EIRDs are financial derivative products that are used by many undertakings for managing interest rate fluctuation and other financial risks (by hedging) and for speculation purposes.

(15) The Settlement Decision of 4 December 2013 already established that […], in individually different periods between 29 September 2005 and 30 May 2008, engaged in collusive practices with a view of distorting the normal course of pricing components for the EIRDs.

(16) The current Decision establishes that Crédit Agricole, HSBC and JP Morgan Chase, for individually different periods in that time period, equally engaged in collusive practices with a view of distorting the normal course of pricing components for the EIRDs. Crédit Agricole participated between 16 October 2006 and 19 March 2007, HSBC between 12 February 2007 and 27 March 2007, and JP Morgan Chase between 27 September 2006 and 19 March 2007.

(17) The parties, through the conduct of certain of their employees, have participated in arrangements in the EIRD sector which consisted of the following practices between different parties: (a) On occasions, certain traders employed by different parties communicated and/or received preferences for an unchanged, low or high fixing of certain Euribor tenors. These preferences depended on their trading positions/exposures. (b) On occasions, certain traders of different parties communicated and/or received from each other detailed, not publicly known/available information on the trading positions or on the intentions for future Euribor submissions for certain tenors of at least one of their respective banks. (c) On occasions, certain traders also explored possibilities to align their EIRD trading positions on the basis of such information as described under (a) or (b). (d) On occasions, certain traders also explored possibilities to align at least one of their banks' future Euribor submissions on the basis of such information as described under (a) or (b). (e) On occasions, at least one of the traders involved in such discussions approached the respective bank's Euribor submitters, or stated that such an approach would be made, to request a submission to the EBF's calculation agent towards a certain direction or at a specific level. (f) On occasions, at least one of the traders involved in such discussions stated that he would report back, or reported back on the submitter's reply before the point in time when the daily Euribor submissions had to be submitted to the calculation agent or, in those instances where that trader had already discussed this with the submitter, passed on such information received from the submitter to the trader of a different party. (g) On occasions, at least one trader of a party disclosed to a trader of another party other detailed and sensitive information about his bank's trading or pricing strategy regarding EIRDs.

(18) In addition, on occasions certain traders employed by different parties discussed the outcome of the Euribor rate setting, including specific banks' submissions, after the Euribor rates of a day had been set and published.

(19) Each party has participated in at least several of these forms of conduct. This occurred throughout the period of the parties' respective involvement in the infringement, although not every party participated in all instances of the collusion and the intensity of the collusive contacts varied over the period of the infringement.

(20) The collusive activity occurred through bilateral contacts, mainly through on-line chats, emails and online messages or over the telephone.

2.3. Individual involvement in the conduct

(21) Between 16 October 2006 and 19 March 2007, Crédit Agricole engaged in bilateral practices falling under at least some of the practices enumerated in point (17).

(22) Between 12 February 2007 to 27 March 2007, HSBC engaged in bilateral practices falling under at least some of the practices enumerated in point (17).

(23) Between 27 September 2006 and 19 March 2007, JPMorgan Chase engaged in bilateral practices falling under at least some of the practices enumerated in point (17).

(24) The Decision establishes that Crédit Agricole, HSBC and JP Morgan Chase participated in a single and continuous infringement of Article 101 of the Treaty and Article 53 of the EEA Agreement. The factual circumstances on the file such as the content of the contacts, the methods used and the objective of the various agreements and/or concerted practices in question, show that the bilateral collusive contacts between the parties were linked and complementary in nature and contributed to a single objective.

2.4. Geographic scope

(25) The geographic scope of the infringement covered at least the whole EEA.

2.5. Remedies

(26) The Decision applies the 2006 Guidelines on Fines ( 9 ) . The Decision imposes fines on the entities of Crédit Agricole, HSBC and JPMorgan Chase listed in point (7) above.

2.5.1. Basic amount of the fine

(27) The basic amount of the fine to be imposed on the undertakings concerned is to be set by reference to the value of sales, the fact that the infringement is by its very nature amongst the most harmful restrictions of competition, the duration and geographic scope of the cartel, the fact that the collusive activities related to financial benchmarks, the paramount importance the affected rates have for the financial services sector within the internal market and the Member States and an additional amount to deter undertakings from entering into such illegal practices.

(28) The Commission normally takes into account the value of the sales made by the undertakings during the last full business year of their participation in the infringement ( 10 ) . It may however depart from this practice, should another reference period be more appropriate in view of the characteristics of the case.

(29) With respect to this infringement, the Commission calculated the annual value of sales for all the parties on the basis of the cash flows that each bank received from its respective portfolio of EIRDs entered into with EEA-located counterparties during the months corresponding to their respective participation in the infringement, discounted by a uniform factor to take account of the particularities of the EIRD industry, such as the netting inherent in this industry, meaning that banks both sell and buy derivatives so that the incoming payments are netted against outgoing payments, and the scale of price variations.

2.5.2. Adjustment to the basic amount: aggravating or mitigating circumstances

(30) There are no aggravating circumstances, but the minor role of Crédit Agricole, HSBC and JPMorgan Chase in the infringement is recognised as a mitigating circumstance in the level of their fines.

2.5.3. Application of the 10 % turnover limit

(31) Article 23(2) of Regulation (EC) No 1/2003 provides that the fine imposed on each undertaking for each infringement shall not exceed 10 % of its total turnover relating to the business year preceding the date of the Commission decision.

(32) In this case, none of the fines exceed 10 % of an undertaking's total turnover relating to the business year preceding the date of this Decision

3. CONCLUSION

(33) The fines imposed pursuant to Article 23(2) of Regulation (EC) No 1/2003 are as follows: (a) Crédit Agricole SA and Crédit Agricole Corporate and Investment Bank, jointly and severally liable: EUR 114 654 000; (b) HSBC Holdings plc, HSBC Bank plc and HSBC France, jointly and severally liable: EUR 33 606 000; (c) JPMorgan Chase & Co., JPMorgan Chase Bank, National Association and J.P. Morgan Service LLP, jointly and severally liable: EUR 337 196 000.

(1) Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, p. 1).

(2) http://www.euribor-ebf.eu/euribor-org/about-euribor.html

(3) The details of the panel composition and submission procedural rules are described in the European Banking Federation's Euribor Code of Conduct (http://www.euribor-ebf.eu/assets/files/Euribor_code_conduct.pdf).

(4) The European Banking Federation's Euribor Code of Conduct, p. 17.

(5) The highest and lowest 15 % of all the panel bank submissions collected are eliminated. The remaining rates are averaged and rounded to three decimal places.

(6) At the time of the infringement, the number of panel banks was 44; currently there are 25.

(7) According to the Bank of International Settlements, the gross market value of outstanding EIRDs (http://www.bis.org/statistics/derstats.htm) was USD 4 747 billion in December 2015 and represents the largest segment of OTC interest rate derivatives.

(8) Commission Notice on Immunity from fines and reduction of fines in cartel cases (OJ C 298, 8.12.2006, p. 17).

(9) Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 (OJ C 210, 1.9.2006, p. 2).

(10) Point 13 of the Guidelines on fines.