Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. Trio of global banks faces €485 million in Euribor fines
Following a five-year long investigation, EU regulators have fined JP Morgan, HSBC and Credit Agricole a total of €485 million for colluding to manipulate the Euribor benchmark rate.
Competition authorities in Brussels have undertaken a lengthy probe investigating rate-rigging of the Euro Interbank Offered Rate (Euribor), Libor’s European counterpart, which began with Barclays alerting the European Commission of misconduct and subsequently reaching a multi-state settlement over Libor and Euribor rate-rigging charges. In 2013, a proposed settlement of €820 million was also imposed on and accepted by Deutsche Bank, Société Générale and Royal Bank of Scotland.
All seven banks have now been fined for entering into a cartel and colluding to manipulate the Euribor rate, which breaches EU antitrust rules and can generate massive gains for the banks, given the volumes they are trading. Credit Agricole, JPMorgan and HSBC refused to join the multi-bank settlement served in 2013 and EU regulators have finally managed to issue fines for the three remaining institutions.
JP Morgan was fined €337m, HSBC €33m and Crédit Agricole €114m. These were all calculated based on their time involved in the cartel and the value of products involved.
However, all three banks continue to deny wrongdoing, with each respective institution issuing a statement declaring as such. JPMorgan states it “did not engage in any wrongdoing with respect to the Euribor benchmark,” whilst Credit Agricole argues it “firmly believes that it did not infringe competition law” and HSBC said it “did not participate in an anti-competitive cartel.”
American magazine Forbes have also argued that the banks shouldn’t necessarily be fined for cartel activity, maintaining that it wasn’t organised manipulation between the banks that took place, but rather collusion and market manipulation amongst individuals working within these institutions.
Regulators around the globe have spent the last decade focusing their efforts heavily on currency market manipulation. Since the beginnings of suspected misconduct in 2003, fines have been levied against a dozen banks for benchmark manipulation with the total value reaching around $9 billion. Over 20 traders have also been individually charged for wrongdoing.
Nonetheless, penalties for the alleged manipulation of the $5.3 trillion forex market remain to be distributed, with Margrethe Vestager, the EU’s competition commissioner, said to be in the process of developing a cartel case against multiple banks for FX rigging.
With the mounting evidence obtained by investigators, it is expected incoming forex fines will exceed anything previously given for rate rigging. Such fines have now become common place within banking and these market tremors are set to reverberate for years to come. While significant regulatory change and compliance frameworks have been implemented over the years, we are yet to see how effectively institutions have implemented the measures to prevent or at least mitigate the risk of wrongdoing. Collusion between traders or a lone wolf is always a threat, but now with a highly sophisticated surveillance techniques and the severe personal penalties for stepping over the line, hopefully these incidents will be few and far between and institutions can continue to rebuild their reputations for the future.
2. Innovation, Innovation, Innovation
Innovation was the talk of the town this week, with Barclays and Linklaters introducing new schemes to assess how they can work in more innovative ways and bring greater value to their customers and clients.
Barclays announced the launch of a new innovation panel with six of the bank’s core legal advisers, including Ashurst and Simmons & Simmons.
Selected based on their use of legal project managers, collaboration with other law firms or services providers, sophistication around pricing arrangements and thought leadership, the aim of the panel is not to pitch firms against each other but provide an environment in which legal innovation can flourish.
The innovation panel was the brainchild of the commercial management team, led by Stephanie Hamon and Chris Grant, which also oversaw the bank’s panel process earlier in the year which saw its legal line up slashed by 60% to 140 firms.
The bank is already working on various projects as a result of the panel, such as apps relating to regulatory changes associated with Brexit, as well as the hiring and training of legal project managers to sit within law firms.
Meanwhile, Linklaters have set up a partner-led global innovation team to oversee the firm’s use of technology.
Led by a trio of partners including Paul Lewis in London, Sophie Mathur in Singapore and Christian Storck in Frankfurt, the team coordinate developments with different practices across the firm, working with ideas from partners, associates and trainees.
Some of the current firm-wide initiatives include working on AI projects, as well as a pilot program teaching lawyers the basics of coding and blockchain.
‘It’s absolutely something general counsel are looking for,’ said Paul Lewis, upon commenting that clients were looking for more from law firms to drive innovation and efficiency.
These are promising signs made by client and law firm alike to harness greater innovation in the sector.
With in-house counsel being universally challenged to do more with less, this presents both a challenge and opportunity for panel law firms in the constant drive to increase their efficiency.
Through fostering innovative thinking, law firms have the ability to offer solutions beyond that of traditionally delivered legal advice that will lead the way legal services are perceived and accessed by clients.
These solutions hinge on the development and use of technology to make legal processes more efficient, and save time and money for clients.
The best route forward, as witnessed here with Barclays, is for law firms to collaborate with clients to take their ideas for better productivity and innovation forward, and in so doing prompt further change and innovation in the sector.
To read more on this topic, check out our blog Collaboration: The Vital Ingredient to Law Firm Success by Directors Philip Burdon and Tom Spence
Movers & Shakers of the week
RBS loses divisional legal chief to property fund Valad Europe
Robin Macpherson joins Valad Europe as Head of Risk
Noerr hires 11-strong team in Warsaw led by ex-White & Case head
Noerr has added an 11-strong team of fee-earners in Warsaw, including former White & Case Warsaw Poland managing partner Witold Danilowicz.
Quinn Emanuel takes fraud heavyweight Hastings from Addleshaw Goddard
Fraud specialist Mark Hastings joins Quinn
Simpson Thacher antitrust head joins Weil Gotshal
Kevin Arquit, antitrust head and former CC rainmaker joins Weil Gotshal & Manges
Shearman private equity partner duo resurface at Goodwin Procter
Former Shearman & Sterling private equity partner duo Mark Soundy and Sarah Priestley are set to join Goodwin Procter
Simmons hires former UBS GC for financial institutions team
Former UBS EMEA group general counsel Andrew Williams joins Simmons as a senior consultant
Squire Patton Boggs hires WilmerHale team in Frankfurt
Former Frankfurt managing partner Reinhart Lange, Christofer Eggers and Eva Schalast are joining Squire Patton Boggs along with a five-strong brand management team
Office Openings & Closings