Banks suspected of cartel activity

The Swiss Competition Commission (Comco) has opened an investigation against UBS and Credit Suisse, as well as against more than ten foreign financial institutions.

Comco said on Friday it had received information regarding potential unlawful agreements among banks. Specifically, collusion between derivative traders which might have influenced the reference rates LIBOR und TIBOR.

Furthermore, market conditions regarding derivative products based on these reference rates might have been manipulated too.

The London Interbank Offered Rate (LIBOR) and the Tokyo Interbank Offered Rate (TIBOR) are reference rates which are aimed at reflecting the interest rate level in the interbank deposit market.

The British Bankers’ Association (for LIBOR) and the Japanese Bankers’ Association (for TIBOR) calculate these reference rates on a daily basis, for a range of currencies, based on submissions by respective panel banks.

Derivative traders working for a number of financial institutions might have manipulated these submissions by coordinating their behaviour, thereby influencing these reference rates in their favour.

Moreover, derivative traders might 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.

Beside the two major Swiss banks, ten foreign banks and other financial intermediaries are subject to the Comco investigation: Bank of Tokyo-Mitsubishi, Citigroup, Deutsche Bank, HSBC Holdings, JP Morgan Chase, Mizuho Financial Group, Rabobank Groep, Royal Bank of Scotland Group, Société Générale, Sumitomo Mitsui Banking Corporation.

Competition authorities in the United States and Britain have launched similar investigations.