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September 18, 2013

Banks Face Fines for Benchmark Safeguard Breaches in EU Plan

Banks risk fines as high as 10 percent of their yearly sales for failing to set up adequate safeguards to combat benchmark rigging, under European Union anti-manipulation rules presented today.

Michel Barnier, the EU’s financial services chief, called for the sanctions as part of sweeping plans to toughen regulation of benchmarks underpinning more than 1,000 trillion euros ($1,335 trillion) of financial contracts ranging from oil and sugar to mortgages and foreign-exchange swaps.

Global regulators are seeking to restore trust in rates undermined by evidence of endemic rigging. Authorities have fined UBS AG, Barclays Plc and Royal Bank of Scotland Group Plc about $2.5 billion for distorting the London interbank offered rate, or Libor, and other interbank rates. Other firms are under investigation around the world.

“Market confidence has been undermined by scandals and allegations of benchmark manipulation,” Barnier said in an e-mailed statement. “This cannot go on.” The proposals from the Brussels-based European Commission “will ensure for the first time that all benchmark providers have to be authorized and supervised. They will enhance transparency and tackle conflicts of interest.’”

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Read full Bloomberg article here

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