EC Fines Banks over Bond Trading Cartel
Posted by Colin Lambert. Last updated: May 22, 2021
The European Commission has fined a second group of banks over claims they operated a bond trading cartel that manipulated markets, fixed prices and shared inappropriate information. Earlier in May, as reported in the 4 May Full FX email, the EC fined Bank of America, Credit Agricole and Credit Suisse EUR 28.5 million, now the Commission has taken aim at Nomura, UBS and Unicredit, fining the three a collective EUR 371 million.
The EC finding also found that Bank of America, Natixis, RBS (now NatWest) and WestLB (in the form of Portigon) were in breach of rules but NatWest avoided a fine because it reported the activity, while BofA and Natixis were also not fined because their infringement falls outside the limitation period for imposition of fines. Similarly, Portigon, the successor of WestLB, was not fined as it did not generate any net turnover in the last business year which served as a cap to the fine.
The conduct is familiar to those versed in the FX market’s own sagas involving chatrooms, the seven banks participated in a cartel through a group of traders working on their European Government Bond desks who were in regular contact with each other mainly in multilateral chatrooms on Bloomberg terminals. In these chatrooms, the relevant traders exchanged commercially sensitive information. They informed and updated each other on their prices and volumes offered in the run up to the auctions and the prices shown to their customers or to the market in general. They discussed and provided each other with recurring updates on their bidding strategy in the run up to the auctions of the Eurozone Member States when issuing euro denominated bonds on the primary market, and on trading parameters on the secondary market.
“A well-functioning European Government Bonds market is paramount both for the Eurozone Member States issuing these bonds to generate liquidity and the investors buying and trading them,” says Margrethe Vestager, executive vice-president of the Commission, in charge of competition policy. “Our decision against Bank of America, Natixis, Nomura, RBS, UBS, UniCredit and WestLB sends a clear message that the Commission will not tolerate any kind of collusive behaviour. It is unacceptable, that in the middle of the financial crisis, when many financial institutions had to be rescued by public funding these investment banks colluded in this market at the expense of EU Member States.”