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HSBC to Escape 33.6 Million Euro EU Euribor Cartel Fine

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On Tuesday, HSBC Holdings plc (HSBC - Free Report) was relieved partially as the General Court, Europe's second highest in conjunction with European Commission (“EC”) agreed to revoke 33.6 million euros ($36.9 million) fine due to inadequate reasoning. However, it acknowledged that the bank was guilty of law infringement. Notably, HSBC was fined by EU antitrust regulators for alleged manipulation of Euro Interbank Offered Rate.

Background

HSBC, along with Credit Agricole S.A. and JPMorgan (JPM - Free Report) , was fined 485 million euros ($520 million) by the EC in 2016. The three banks, denying any wrongdoing, had challenged the decision. Notably, HSBC was fined with the lowest amount as it was expected to be part of the cartel for a month. Notably, JPMorgan was fined 337.2 million euros and Credit Agricole 114.7 million euros.

These three banks were not part of the multi-bank settlement deal that was announced by the EU in December 2013.

Notably, an aggregate penalty of around £825 million ($888 million) was imposed on four banks – Barclays PLC (BCS - Free Report) , Société Générale, Deutsche Bank AG (DB - Free Report) and The Royal Bank of Scotland Group plc – over similar allegations.

The banks were accused of colluding to rig the key interest rate benchmark with an aim to influence the prices of several global financial instruments between September 2005 and May 2008. The commission accused HSBC, JPMorgan and Credit Agricole of breaching the EU antitrust rules.

In May 2014, charges were levied against these three banks, while they continued to deny any wrongdoing. Hence, there were delays in penalizing these banks.

Conclusion

Business malpractices continue to be a cause of concern for banks. Nearly $9 billion fine (in total) has been imposed on several banks by regulators across the globe for alleged rigging of London interbank offered rate and many such benchmarks over the past few years.

Notably, this decision might help HSBC to develop its business. Also, the bank would be able to distribute excess capital to its shareholders, thus enhancing their value.

Shares of HSBC have lost around 7.8% year to date against the 2.8% growth of the industry it belongs to.

 

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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