Traders at five major banks colluded in chatrooms to swap sensitive information on UK bonds in the wake of the 2008 financial crisis, Britain’s antitrust agency said in a move that could pave the way for fines for some of the lenders involved.
(Bloomberg) — Traders at five major banks colluded in chatrooms to swap sensitive information on UK bonds in the wake of the 2008 financial crisis, Britain’s antitrust agency said in a move that could pave the way for fines for some of the lenders involved.
Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, Morgan Stanley and Royal Bank of Canada each unlawfully shared details on pricing and trading strategies in chatrooms between 2009 and 2013, the Competition and Markets Authority said on Wednesday in its provisional findings.
Deutsche Bank, which was the first to self-report its involvement, won’t be fined and any penalty that Citi receives will be discounted after the duo admitted to the collusion.
By sharing the sensitive information with competitors the banks involved could have prevented the full competition benefits of anyone they traded with, including, pension funds and ultimately UK taxpayers, the watchdog said.
HSBC, Morgan Stanley and Royal Bank of Canada haven’t admitted any wrongdoing. At this stage, no assumption should be made that any of the banks have broken the law. Penalties may be issued once a final conclusion is reached the regulator added.
The case relates to a small number of traders who worked at the bank and was connected to the buying and selling of UK government bonds — gilt and gilt asset swaps, the CMA said. It involved details of pricing and trading strategies. The conversations were one-to-one, the CMA said.
Some of the alleged collusion happened in relation to Bank of England holding buy-back auctions in 2009, in response to the financial crisis as a part of its quantitative easing policy.
Potential Fines
“In theory, fines could be up to 10% of each bank’s annual global turnover,” said Zach Meyers, a senior research fellow in competition policy at the Centre for European Reform. “Since the collusion only relates to a small part of their businesses, the fines are likely to be considerably smaller.”
Antitrust watchdogs across Europe have taken a closer look at bond market collusion in a series of probes targeting some of the biggest banks in the region. The European Commission issued a formal complaint to Deutsche Bank last year for its alleged role in a cartel linked to euro-denominated bonds.
That was the third EU investigation involving cartels affecting the market for bonds trading and comes after the EU spent more than a decade probing how bank traders swapped information in chatrooms.
The UK watchdog has been investigating the allegations since it first opened the probe in November 2018, but has publicly revealed little details about what area of financial services or banks were involved. A separate CMA cartel probe saw 10 construction firms fined £60 million ($74.5 million).
–With assistance from Tom Metcalf.
(Updates with bank comments at the bottom of the story)
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