Bankers and traders found guilty of rigging benchmark rates from Libor to oil would face tougher fines and other sanctions in the future under a deal reached by the European Union to overhaul its penalties for market abuse.
Nations clinched a draft accord with European Parliament lawmakers to toughen sanctions against market abuse. The accord sets out minimum penalties available to regulators when they punish perpetrators. As well as rate rigging, the draft law covers other kinds of market manipulation and insider trading.
“On top of manipulation of Libor we are witnessing more alleged and potential manipulation of benchmarks in energy markets such as oil and gas, while investigations have begun into whether traders at some of the world’s biggest banks have manipulated foreign exchange rates,” Arlene McCarthy, the parliament’s lead lawmaker on the proposals, said in an e-mailed statement on the deal. The law ‘‘provides for tough minimum sanctions and a permanent ban from working in the industry.”
Global regulators have fined UBS AG (UBSN), Barclays Plc (BARC) and Royal Bank of Scotland Group Plc about $2.5 billion in the past year for distorting Libor and similar benchmarks. At least a dozen firms remain under investigation around the world. Probes into potential rigging have expanded beyond interbank lending rates such as Libor to include markets ranging from oil prices to foreign exchange.
Royal Dutch Shell Plc (RDSA), BP Plc (BP/), Statoil ASA (STL) and Platts, the oil-price data collector owned by McGraw Hill Financial Inc. (MHFI), are being investigated by the European Commission on price fixing concerns.
Michel Barnier, the EU’s financial services commissioner, said the new rules would respond “recent scandals on interest rate, commodity and currency benchmarks.”
He said investors will “be reassured that manipulation of benchmarks is prohibited and subject to strict sanctions.”
Financial Stability Board Chairman Mark Carney, the next Bank of England governor, said this week that global regulators will set up a task force with banks in a bid to repair or replace tarnished benchmarks in the wake of the rate-rigging scandals.
Legislators and national officials had to overcome splits on topics including the maximum fines available to regulators, with legislators pushing for stronger sanctions than those proposed by national governments.
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