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Competition Commission opens bank investigation

Andreas Moll

Pursuant to a press release of February 3 2012, the Swiss Competition Commission (Comco) has received information regarding potentially unlawful cartel agreements among banks. Specifically, collusion between derivative traders might have influenced the Libor and Tibor reference interest rates. Furthermore, market conditions regarding derivative products based on these reference rates might also have been manipulated. The Commission has therefore opened an investigation against UBS and Credit Suisse, as well as more than 10 foreign institutions (Bank of Tokyo-Mitsubishi UFJ, Citigroup, Deutsche Bank, HSBC Holdings, JP Morgan Chase, Mizuho Financial Group, Rabobank Groep, Royal Bank of Scotland Group, Société Générale, and Sumitomo Mitsui Banking Corporation).

According to the British Bankers' Association, loans and other liabilities in the amount of $350 trillion refer to Libor. Considering the global importance of this rate, critics have pointed out how vulnerable it is to manipulation as its determination process does not take place over a public exchange.

Since the start of the financial crises in 2008, there have been rumours that panel banks have been submitting inaccurate data to manipulate Libor. Some banks allegedly tried to keep the rates low in order to conceal their own true financial situation. Related investigations have been initiated by several authorities: US Securities and Exchange Commission, US Commodity Futures Trading Commission, US Department of Justice, European Commission, UK Financial Services Authority and Japan's Financial Services Agency).

The subject of the latest investigation started by Comco is the alleged unlawful collusion of derivatives traders of various banks in order to influence Libor and Tibor with respect to certain currencies. In addition to increasing their margin with respect to credit rates, they might also have colluded to manipulate the difference between the ask price and the bid price (spread) of derivatives based on these reference rates to the detriment of their clients.

Comco received the facts leading to the opening of the investigation by an application for its leniency programme. Several Swiss newspapers have assumed that UBS was the whistleblower in the case at hand, trying to get away without a penalty as the first concerned bank (based on the leniency programme).

While UBS has communicated that it "take[s] the investigation very seriously and [is] willing to fully cooperate with the authorities", Credit Suisse has not yet released a press statement. In the meantime, based on the latest press information available, several banks (including UBS, Royal Bank of Scotland, Deutsche Bank and Citigroup, but not Credit Suisse) have released one or more traders who apparently were involved in the collusion.

Andreas Moll

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