Five big banks ‘colluded on UK bonds’

• Traders allegedly shared pricing and strategy details

Traders at five big banks colluded in chatrooms to swap sensitive information on UK bonds after the 2008 financial crisis, Britain’s antitrust agency said in a move that could lead to fines for some of those involved.

Citigroup, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada shared details on pricing and trading strategies unlawfully in chatrooms from 2009 to 2013, the Competition and Markets Authority (CMA) said on Wednesday in its provisional findings.

Deutsche Bank, the first to self-report its involvement, will not be fined. Any penalty that Citi gets will be discounted after the duo admitted to the collusion.

By sharing sensitive information with competitors, the banks 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 have not admitted any wrongdoing. At this stage, it should not be assumed that any of the banks broke the law. Penalties may be issued once a final conclusion is reached, said the regulator.

The case relates to a few traders who worked at the banks and was connected to 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.

Some of the alleged collusion was in relation to the Bank of England holding buyback 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

PENALTIES MAY BE ISSUED AFTER ITS FINAL REPORT, COMPETITION AND MARKETS AUTHORITY SAYS IN PROVISIONAL FINDINGS

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 region’s biggest banks.

The European Commission complained formally to Deutsche Bank in 2022 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. It comes after the EU spent more than a decade probing how bank traders swapped information in chat rooms.

The UK watchdog has been investigating the allegations since it began the probe in November 2018.

It has publicly revealed few details about what area of financial services or banks were involved.

A separate CMA cartel probe saw 10 construction companies fined £60m.