Five major banks are said to have broken UK competition law by sharing sensitive information in chatrooms, according to a provisional finding by the UK Competition and Markets Authority (CMA).

The alleged behaviour is said to have taken place between 2009 and 2013, and involved the buying and selling of UK government bonds. Details on pricing and other aspects of the banks’ trading strategies are said to have been shared in Bloomberg chatrooms.

The banks named are Citi, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada.

“This could have denied taxpayers, pension savers and financial institutions the benefits of full competition.”

Michael Grenfell, Executive Director of Enforcement, CMA

Michael Grenfell, Executive Director of Enforcement at the CMA, said: “Our provisional decision has found that, in the aftermath of the global financial crisis, five global banks broke competition law by taking part in a series of one-to-one online exchanges of competitively sensitive information on pricing and other aspects of their trading strategies on UK bonds.

“This could have denied taxpayers, pension savers and financial institutions the benefits of full competition for these products, including the minimisation of borrowing costs.”

He continued: “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.”

Leniency

Deutsche Bank alerted the CMA to its participation in the alleged unlawful behaviour under the regulator’s leniency policy, and Citi also applied for leniency during the course of the CMA investigation. Both have admitted involvement in anti-competitive activity. If they continue to cooperate and comply with the conditions of leniency, Deutsche Bank will not be fined and any fine imposed on Citi will be discounted.

Citi will receive a further discount to any fine imposed if it complies with the terms of a settlement agreement it has reached with the CMA.

HSBC, Morgan Stanley and Royal Bank of Canada have not admitted any wrongdoing. At the CMA stresses that “At this stage, no assumption should be made that any of the banks have broken the law.”

Ongoing investigation

The CMA investigation is ongoing. If it reaches a final conclusion that two or more of the banks were engaged in anti-competitive activity, it will publish an infringement decision and may issue fines.

Rob Mason, Director of Regulatory Intelligence at our parent company Global Relay, said: “I don’t recall another notable case of this nature being brought by the CMA. Some fines were mentioned though not the extent is not entirely clear. It does have the ability to impose fines of up to 10% of annual global turnover for breaches, plus an additional 5% of daily turnover for each day of continued non-compliance in some cases.

“On a more general note, the CMA seems to be more active as it was the body which recently blocked the massive Microsoft-Activision deal.”