EU makes Libor rigging punishable with fines and bans

Tue Sep 10, 2013 12:59pm EDT
 
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By Claire Davenport and Huw Jones

STRASBOURG, France/LONDON (Reuters) - Companies found guilty of rigging market benchmarks like Libor could be fined the equivalent of 15 percent of their turnover under a European Union law approved on Tuesday.

The EU law, approved by the European Parliament and due to come into force within two years, revises market abuse rules to make the rigging of benchmarks illegal.

The market abuse rules are also extended to cover electronic trading such as "high-frequency" trading, criticized by some lawmakers for creating volatility in markets.

Three banks - UBS, RBS and Barclays - have been fined for rigging the London Interbank Offered Rate or Libor, but only under existing conduct rules.

This prompted lawmakers to widen the scope of EU rules to benchmarks, as well as to commodity derivatives affecting food and energy prices, to underscore their determination to clamp down on malpractice.

Penalties have also been toughened up so that companies convicted of abuses could be fined up to 15 percent of their annual turnover or 15 million euros ($19.9 million), with individuals fined up to 5 million euros and banned from the industry.

"The Libor scandal was market manipulation of the worst kind. We are seeing more alleged and potential manipulation of benchmarks in energy markets such as oil and gas and foreign exchange markets," said Arlene McCarthy, the British center-left lawmaker who negotiated the rules with member states.

A second leg to the revision of the EU rules, which will introduce powers to jail market abusers, is expected to be also approved in coming weeks.   Continued...