Back in the day, a banker was regarded as a pillar of the local community and, if memory serves, could even countersign a UK Passport application. Today, that perception has been shattered. Bankers are now widely regarded as excessively greedy, dishonest and largely beyond the reach of the law. Much of the blame for the Global Financial Crisis has been laid at the door of financiers and bankers and the complex vehicles that they sometimes use to turn profits for their clients – securitised sub-prime mortgages leaps readily to mind. At the height of the crisis, it emerged that some banks had been manipulating LIBOR to bolster their share prices and also for trading benefits for their investment arms. The LIBOR rate affects interest charged in literally trillions of dollars’ worth of contracts around the world on a daily basis.
The latest banking scandal to emerge is another involving rate rigging: this time Euribor – a key benchmark borrowing rate involving the Euro. JP Morgan, HSBC, Credit Agricole, Barclays, Deutsche Bank, RBS and Société Générale have been implicated in a European Commission investigation.
The penalties that banks could face if found guilty by the EC could amount to a whopping 10% of their annual revenue. JP Morgan and HSBC maintain that they have done nothing wrong and will fight the allegations strenuously; Credit Agricole will look at the EC findings before making further comment. RBS, Société Générale and Deutsche Bank have already been fined a total of €1.04 billion for their involvement in the scandal. Barclays avoided a fine by notifying the EC of the existence of the cartel and the others gained a 10% reduction in their penalties by agreeing settlement with the European Commission.
Speaking of JP Morgan, HSBC and Credit Agricole, the EC’s competition body stated: "The Commission has concerns that the three banks may have taken part in a collusive scheme which aimed at distorting the normal course of pricing components for euro interest rate derivatives." The EC has been looking into the issue since March 2013.