Five banks have broken UK government bond competition law, watchdog says

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

A small number of traders from Citigroup, Deutsche Bank, HSBC, Morgan Stanley and the Royal Bank of Canada have illegally shared sensitive information, including on pricing and strategies, in chat rooms on Bloomberg terminals, according to an interim finding released by the Competition and Market Guarantor Authority on Wednesday.

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

The alleged sharing of sensitive information occurred between 2009 and 2013, the CMA said, adding that traders exchanged information “in the context of” the DMO’s sale of government bonds and buybacks of gilts by the Bank of England.

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

“A competitive and functioning 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 justify the detailed investigation we have undertaken,” she added.

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

The competition watchdog said it was alerted by Deutsche Bank’s behavior and that Germany’s largest bank admitted to its involvement in “anti-competitive” activities. Deutsche will therefore not be subject to any sanctions should the CMA impose them.

Citigroup 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 the Royal Bank of Canada have not admitted to any wrongdoing, the CMA said, adding that its investigation was ongoing.