Five banks broke competition law over UK government bonds, watchdog says

Five of the world’s largest banks broke UK competition law by sharing sensitive information when trading British government bonds in the five years after the global financial crisis, according to the country’s competition regulator.

A small number of traders at Citigroup, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada unlawfully shared sensitive information, including on pricing and strategies, in chatrooms on Bloomberg terminals, according to a provisional finding published by the Competition and Markets Authority on Wednesday.

As a result, the regulator said, the banks could have “denied the full benefits of competition” to those they were trading with, including pension funds and the UK’s Debt Management Office.

The alleged sharing of sensitive information took place between 2009 and 2013, the CMA said, adding that traders swapped information “in the context of” government bond sales by the DMO and the repurchase of gilts by the Bank of England.

“Our provisional decision has found that, in the aftermath of the global financial crisis, five global banks broke competition law,” said Michael Grenfell, director of enforcement at the CMA.

“A properly functioning, competitive bond market benefits tens of millions of taxpayers and pension savers as well as being at the heart of the UK’s reputation as a global financial hub. These alleged activities are therefore very serious and warrant the detailed investigation we have undertaken,” he added.

The regulator said if it concluded that at least two banks engaged in anti-competitive behaviour, it might issue fines.

The competition watchdog said it was alerted to the behaviour by Deutsche Bank and that Germany’s biggest bank had admitted its involvement in “anti-competitive” activity. Deutsche will therefore not be subject to any fines should the CMA levy them.

Citigroup has also admitted involvement and entered into a settlement agreement with the CMA. The Wall Street bank will receive a discounted fine if penalties are imposed, the regulator said.

HSBC, Morgan Stanley and Royal Bank of Canada have not admitted any wrongdoing, the CMA said, adding that its probe was ongoing.