Five major global banks have been found to have violated UK competition law by sharing sensitive information while trading British government bonds in the aftermath of the financial crisis, according to preliminary findings from the UK’s Competition and Markets Authority (CMA).
Citigroup, Deutsche Bank, HSBC, Morgan Stanley, and Royal Bank of Canada had traders who unlawfully exchanged confidential information, including pricing and strategies, through chat rooms on Bloomberg terminals between 2009 and 2013. The CMA stated that this behavior could have hindered fair competition, impacting entities such as pension funds and the UK’s Debt Management Office.
“A properly functioning, competitive bond market benefits tens of millions of taxpayers and pension savers as well as being at the heart of the UK’s reputation as a global financial hub. These alleged activities are therefore very serious and warrant the detailed investigation we have undertaken,” said Michael Grenfell, director of enforcement at the CMA.
The information exchange occurred in relation to government bond sales by the Debt Management Office and the repurchase of gilts by the Bank of England. The CMA, which launched its investigation in 2018, may impose fines if it determines that at least two banks engaged in anti-competitive conduct. The regulator has the authority to levy fines of up to 10% of a company’s global turnover in the relevant market. The ongoing probe does not include an investigation into individual traders.
If fines are imposed, they could potentially be significant, depending on factors such as the extent and duration of the misconduct. Investors, including pension funds, might also initiate civil lawsuits following these findings. Deutsche Bank, the first to report the behavior, will not face fines as it acknowledged its involvement in “anti-competitive” activities. Citigroup has also admitted its involvement and reached a settlement agreement with the CMA, potentially receiving a reduced fine if penalties are imposed. HSBC, Morgan Stanley, and Royal Bank of Canada have not admitted wrongdoing, and the CMA’s investigation is ongoing, with the findings considered provisional.
The banks will have the opportunity to respond formally to the findings before the CMA makes a final decision on whether competition law has been breached and determines the level of any fines. The decision can then be appealed to the Competition Appeal Tribunal. While some banks disagreed with the CMA’s provisional allegations, they expressed cooperation with the investigation.
The CMA’s provisional findings come after the European Commission’s 2021 ruling, which found that seven banks had violated EU antitrust rules by participating in a cartel in the primary and secondary market for European government bonds. The CMA’s actions demonstrate its assertiveness and independence from the European Commission following Brexit, according to legal experts.
