The General Court of the European Union rejected all of HSBC's arguments in the case.
The penalty stems from a 2021 decision by the European Commission, the EU's competition authority, which concluded that HSBC, along with JPMorgan Chase and Crédit Agricole (CAGR.PA), colluded in 2007 to rig Euribor, a key benchmark interest rate. The cartel aimed to manipulate Euribor rates to increase profits or minimise risk on financial products tied to the benchmark, such as interest rate swaps, futures, savings accounts, and mortgages.
HSBC initially faced a EUR 33.6 million fine in 2016, but the General Court annulled the penalty in 2019, citing insufficient justification by regulators. The European Commission subsequently revised its decision, reducing the fine to EUR 31.7 million in 2021.
Other banks implicated in the cartel, including Deutsche Bank, RBS, and Société Générale, admitted their involvement and received reduced penalties. Barclays avoided a fine by reporting the cartel to authorities.
The case highlights broader regulatory efforts across the EU, US, and UK to penalise banks for manipulating benchmark interest rates and foreign exchange markets. HSBC retains the option to appeal this decision to the Court of Justice of the European Union, the EU's highest court.
The Euribor (Euro Interbank Offered Rate) serves as a critical benchmark for determining interest rates on a wide range of financial products, including mortgages, savings accounts, and derivatives, with its influence extending to trillions of EUR in contracts. Calculated daily based on interbank lending rates submitted by a panel of banks, Euribor reflects the average cost of unsecured borrowing in the Eurozone. The manipulation of this benchmark from 2005 to 2008 disrupted financial market integrity, as colluding banks sought to distort rates for competitive advantage, thereby affecting countless financial agreements tied to Euribor.
During the cartel’s operation, the participating banks leveraged their submissions to inflate or suppress the rate in alignment with their trading positions. This manipulation not only amplified profits but also shielded them from potential losses. Research indicates that even slight adjustments in benchmark rates can lead to significant financial impacts, given the scale of Euribor-linked products. The scandal highlights systemic vulnerabilities in benchmark-setting processes, prompting sweeping regulatory reforms to enhance transparency and reduce conflicts of interest.
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