HSBC dropped out of negotiations to settle a European Union antitrust probe into allegations that banks rigged Euribor lending rates, according to a person familiar with the probe.
HSBC, Europe's biggest bank by value, pulled out of the talks, according to the person, who asked not to be identified because the discussions are confidential. The talks stumbled over the possible size of a fine and liability issues, according to a second person, who also asked not be named. Six other banks also entered into settlement talks with the European Commission, said the person. At least one of those may have also pulled out of the discussions, the person said.
Regulators around the world are investigating whether more than a dozen firms, including Deutsche Bank, colluded to rig benchmark interest rates to mask their true cost of borrowing. Barclays, UBS and Royal Bank of Scotland are among firms who have been fined about $3.7 billion for rigging the London interbank offered rate, or Libor, the benchmark for more than $300 trillion of securities worldwide.
A non-settling party may think it has "a better chance of limiting exposure" in front of the courts, said Rony Gerrits, a lawyer at Morrison & Foerster in Brussels, who isn't involved in the cases.
Banks settling with the EU will agree to admit to collusion over the manipulation of Euribor and may face fines as early as December, one of the people said. In exchange, they will get a 10 percent reduction on their fine. HSBC would be separately sent a formal statement of objections.
Joaquin Almunia, the EU's antitrust chief, has described rate-fixing as "quite shocking."
Antoine Colombani, a spokesman for the European Commission in Brussels, declined to comment on the case. Brendan McNamara, a spokesman for HSBC in London declined to comment.
To gather information, commission officials raided banks, including Deutsche Bank and RBS, that offer financial derivatives linked to Euribor in 2011, saying they were investigating possible collusion. The EU sent questionnaires to Barclays and HSBC earlier that same year.
"We believe that traders of interest-rate derivatives colluded to manipulate the Euribor and Libor rates of the banks to influence them and obtain a benefit in their own trading positions," Almunia said last month.
The EU's antitrust chief has been vocal about his desire to settle both probes by the end of the year and he pointed out what would happen to entities not wishing to play ball.
"Let me stress that if a company ultimately decides not to join the others in a global settlement, it will continue to be investigated under normal proceedings," Almunia said.
That would mean facing a formal antitrust complaint, a so- called statement of objections, which would pave the way to a fully-fledged fine.
Settling parties would also receive a short statement of objections, to which they would be invited to merely confirm the content, before the reduced fine would be issued.