December 4 2021: The European Commission has completed its cartel investigation into the Foreign Exchange (‘Forex’) spot trading market by imposing fines on five banks. The Commission has adopted today a decision imposing a total fine of € 261 million on the four banks that decided to settle the case, namely UBS, Barclays, RBS and HSBC. The Commission has also fined Credit Suisse € 83 million under the ordinary procedure.
Executive Vice-President Margrethe Vestager, in charge of competition policy said: “Today we complete our sixth cartel investigation in the financial sector since 2013 and conclude the third leg of our investigation into the Foreign Exchange spot trading market. Our cartel decisions to fine UBS, Barclays, RBS, HSBC and Credit Suisse send a clear message that the Commission remains committed to ensure a sound and competitive financial sector that is essential for investment and growth. Foreign exchange spot trading activities are one of the largest financial markets in the world. The collusive behaviour of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers”.
The Commission’s investigation focused on the trading of the G10 currencies, the most liquid and traded currencies worldwide. When companies exchange large amounts of different currencies, they usually do so through a Forex trader. The main customers of Forex traders include asset managers, pension funds, hedge funds, major companies and other banks.
The Commission’s investigation revealed that some traders in charge of the Forex spot trading of G10 currencies, acting on behalf of the fined banks, exchanged sensitive information and trading plans, and occasionally coordinated their trading strategies through an online professional chatroom called Sterling Lads.
These information exchanges enabled the traders to make informed market decisions on whether and when to sell or buy the currencies they had in their portfolios, as opposed to a situation where traders acting independently from each other take an inherent risk in taking these decisions.
Occasionally, these information exchanges also allowed the traders to identify opportunities for coordination, for example through a practice called “standing down”, whereby some of them would temporarily refrain from trading to avoid interfering with another trader.
The fines were set on the basis of the Commission’s 2006 Guidelines on fines (see also MEMO). In setting the fines, the Commission took into account, in particular, the sales value in the European Economic Area (‘EEA’) achieved by the cartel participants for the products in question, the serious nature of the infringement, its geographic scope and its duration.
Under the Commission’s 2006 Leniency Notice, UBS received full immunity for revealing the existence of the cartels, thereby avoiding an aggregate fine of ca. € 94 million. Barclays, RBS, HSBC benefited from reductions to their fines for cooperating with the Commission’s investigation. The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the existence of the cartel in which they were involved.
In addition, under the Commission’s 2008 Settlement Notice, the Commission applied a reduction of 10% to the fines imposed on Barclays, HSBC, RBS and UBS, in view of their acknowledgment of participation in the cartel and of their liability in this respect.
Since Credit Suisse did not cooperate under the leniency or settlement procedures, it did not benefit from any reductions granted within those frameworks. The Commission has however granted a total reduction of 4% to reflect the fact that Credit Suisse is not held liable for all aspects of the case.
Background on the Forex investigation
The Commission’s investigation in the Forex case started with an immunity application under the Commission’s Leniency Notice submitted by UBS, which was followed by applications for reduction of fines by the other parties. The investigation revealed the existence of three separate infringements concerning the Forex market.
The most liquid and traded currencies worldwide (five of which are used in the EEA) are the G10 currencies, which in fact include 11 currencies, namely the Euro, British Pound, Japanese Yen, Swiss Franc, US, Canadian, New Zealand and Australian Dollars, and Danish, Swedish and Norwegian Crowns.
Today’s decisions in Forex (Sterling Lads) complete the wider Commission’s Forex investigation. The other two infringements were concluded with settlement decisions adopted in May 2019:
The Forex (Three Way Banana Split) settlement decision concerned communications in three different, consecutive chatrooms (“Three way banana split / Two and a half men / Only Marge”) among traders from UBS, Barclays, RBS, Citigroup and JPMorgan. The infringement started on 18 December 2007 and ended on 31 January 2013.
The Forex (Essex Express) settlement decision concerned communications in two chatrooms (“Essex Express ‘n the Jimmy” and “Semi Grumpy Old men”) among traders from UBS, Barclays, RBS and Bank of Tokyo-Mitsubishi (now MUFG Bank). The infringement started on 14 December 2009 and ended on 31 July 2012.
Action against cartels
Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) and Article 53 of the EEA Agreement prohibit cartels and other restrictive business practices.
Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. This money is not earmarked for particular expenses, but Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU and reduce taxpayers’ contributions.
In accordance with the EU-UK Withdrawal Agreement, the Union continues to be competent for this case, which was initiated before the end of the transition period (“continued competence case”). The EU shall reimburse the UK for its share of the amount of the fine once the fine has become definitive. The collection of the fine, the calculation of the UK’s share and the reimbursement will be carried out by the Commission.