| 24 July 2024, Wednesday |

Deutsche, Citi admit anti-competitive bond market activity in UK probe

Deutsche Bank and Citigroup confessed anti-competitive behavior by exchanging sensitive information on UK government bonds between 2009 and 2013, according to Britain’s anti-trust authority, which found five banks in violation of competition regulations.

Meanwhile, HSBC, Morgan Stanley, and the Royal Bank of Canada have not admitted any wrongdoing in connection with the suspected exchange of information in one or more one-on-one chats between a small number of traders in Bloomberg chatrooms during the global financial crisis.

Britain’s Competition and Markets Authority (CMA) said in a statement on Wednesday it would consider further representations from the banks before reaching a final decision on its next steps and the possible issue of financial penalties.

The CMA said the conversations are alleged to have related to the buying and selling of UK government bonds – specifically, gilts and gilt asset swaps – and included details on pricing and other aspects of trading strategies.

“These alleged activities are … very serious and warrant the detailed investigation we have undertaken. This could have denied taxpayers, pension savers and financial institutions the benefits of full competition for these products, including the minimization of borrowing costs,” said Michael Grenfell, Executive Director of Enforcement at the CMA.

The CMA said it was yet to decide if there was sufficient evidence of an infringement of competition law for it to take enforcement action against any of the banks. Until then, no assumption should be made that any of them had broken the law, it said.

Having alerted the CMA to its involvement via its leniency policy, Deutsche Bank will not be fined if the provisional findings are upheld. Citi also struck a settlement with the CMA and will also likely receive a discount if a fine is imposed.

A spokesperson for Morgan Stanley said it disagreed with the CMA’s provisional findings and intended to contest them.

“Morgan Stanley cooperated fully with the watchdog during the investigation and will continue to engage in the process,” the spokesperson said.

HSBC denies the allegations and will continue to make its case while awaiting the CMA’s final decision, the London-based bank told Reuters in an emailed statement.

RBC told Reuters said it was unable to comment on an ongoing regulatory matter, but had cooperated fully with the CMA and took any allegation of employee misconduct very seriously.

In the wake of the financial crisis, the Bank of England shored up the UK economy and markets by buying UK government debt, also known as gilts, via regular buy-back auctions.

Those auctions prompted some of the alleged exchanges of information among some of the banks involved, the CMA said.

Financial sector workers use Bloomberg chatrooms to communicate with customers and colleagues. The company, which is a Thomson Reuters competitor, is not being investigated.

  • Reuters