European Commission Fines 7 Investment Banks a Total of 371 Million Pounds for Running Illegal Bond-trading Cartel
Moneylife Digital Team 20 May 2021
The European Commission (EC) has levied a total fine of 371 million pounds on Bank of America, Natixis, Nomura, RBS (now NatWest), UBS, UniCredit and WestLB (now Portigon) for breaching antitrust rules of the European Union (EU) through participation of a group of traders in a cartel in the primary and secondary market for European Government Bonds (EGB).
 
In a statement, Margrethe Vestager, executive vice-president of the Commission and in charge of competition policy says, "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."

"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," she added.

According to EC, the seven investment banks participated in a cartel through a group of traders working on their EGB desks and operating in a closed circle of trust. These traders 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," the Commission says.

The conduct of these seven investment banks partially took place during the financial crisis and more specifically between 2007 and 2011, and affected the entire European economic area (EEA).

In setting the level of fines, the Commission says it considered the sales value in the EEA achieved by the cartel participants for the products in question, the serious nature of the infringement, including that the cartel related to a Euro-based financial product on the primary and secondary markets, its geographic scope, and the respective duration of participation.

European government bonds or EGB are debt securities issued in Euro by the central governments of the Eurozone member states. The governments issue EGB to raise funds in international financial markets: they borrow money for a fixed term and a predefined interest rate. The bond-holder periodically receives the interest (coupon) and the principal amount at the agreed maturity date.
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