Five banks ‘broke UK competition regulation’

HSBC, 4 others shared sensitive data on bond trades, watchdog finds provisionally

HSBC and four other large banks broke UK competition law by sharing “competitively sensitive information” in chat rooms while trading British government bonds, according to a provisional finding by Britain’s Competition and Markets Authority (CMA).

Information was shared in one-to-one Bloomberg chat rooms among a small number of traders at Citigroup, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada (RBC) between 2009 and 2013, including details on pricing and trading strategies for UK government bonds, known as gilts, and gilt asset swaps, according to the regulator.

“This [activity] could have denied taxpayers, pension savers and financial institutions the benefits of full competition for these products, including the minimisation of borrowing costs,” Michael Grenfell, the CMA’s executive director of enforcement, said.

The HSBC allegations refer specifically to a former HSBC trader sharing information with a Deutsche Bank trader regarding gilts between October 2009 and July 2010.

“HSBC refutes the CMA’s allegations,” said a spokesman for the bank. “We will continue to make our case to the CMA as appropriate whilst we await a final decision.”

Deutsche Bank alerted the CMA to the alleged unlawful activity and Citi applied for leniency during the inquiry, with both banks admitting to being involved in anticompetitive behaviour, the CMA said. The inquiry began in November 2018.

“Deutsche Bank proactively reported the issue to the UK authority and has cooperated fully in the subsequent investigation, which related to activity prior to 2014,” the bank said.

Provided that the banks continued to cooperate and comply with the conditions of leniency, Deutsche Bank would avoid a fine and any fine issued to Citi would be discounted, the CMA said.

Citi has also entered a settlement agreement with the CMA, which would entitle it to a further reduction in any fine imposed. “We have cooperated fully with the CMA on this matter,” a Citi official said.

RBC and Morgan Stanley have not admitted to wrongdoing.