By Tommy Reggiori Wilkes and Shashwat Awasthi
LONDON -Britain’s competition regulator has fined Citi, HSBC, Morgan Stanley and Royal Bank of Canada (RBC) a combined 104.5 million pounds ($132.4 million) for exchanging sensitive information about UK government bonds.
The Competition and Markets Authority (CMA) said on Friday that it had reached settlements with the banks over the sharing of information by their traders in the aftermath of the global financial crisis, between 2009 and 2013.
The banks’ traders shared competitively sensitive information that was relevant to the pricing of UK bonds, known as gilts, in one-to-one exchanges in Bloomberg chatrooms, the CMA said.
The watchdog had found the four lenders and Deutsche Bank in breach of competition rules in May 2023 after an investigation opened in 2018. Deutsche Bank, which along with Citi had admitted to anti-competitive activity, was given immunity from the fine after it alerted the CMA to what had happened.
British government debt issuance rose sharply after the crisis and the Bank of England shored up the UK economy and markets by buying government debt through regular auctions.
Individual traders began exchanging market-sensitive information on auctions by the UK’s Debt Management Office, the subsequent buying and selling of gilts and gilt asset swaps and on BoE auctions, the CMA found.
A Citi statement said the bank was pleased to resolve the matter. “We cooperated fully with the CMA and remain committed to ensuring full regulatory compliance,” a spokesperson added.
Morgan Stanley said the CMA’s investigation centred on the actions of a former employee and that the bank and the industry had since “undergone significant changes, including enhanced supervision and compliance controls”.
HSBC said the investigation related to a small number of communications between it and Deutsche Bank in 2009-2010. The bank said it had transformed its controls and that the CMA acknowledged it had a “robust compliance programme” in place.
Deutsche Bank said it had “proactively reported the issue” and cooperated fully with a subsequent investigation.
RBC said that it had “significantly enhanced” its compliance over the past decade. The two employees involved are no longer with the bank, it added.
“The fines imposed today reflect the CMA’s commitment to dealing with competition law breaches and deterring anti-competitive conduct,” said Juliette Enser, executive director of competition enforcement at the CMA.
“The fines would have been substantially higher had the banks not already taken unusually extensive steps to make sure that this doesn’t happen again.”
RBC received the largest fine at 34.2 million pounds, followed by Morgan Stanley (29.7 million pounds) and HSBC (23.4 million pounds). All three banks were given a 10% reduction for settling after the CMA’s Statement of Objections.
Citi was fined 17.16 million pounds, which included a 35% leniency discount and a 20% reduction for settling before the CMA’s statement.
($1 = 0.7891 pounds)
(Reporting by Tommy Reggiori Wilkes in London and Shashwat Awasthi in Bengaluru Additional reporting by Dhanush Vignesh BabuEditing by Mrigank Dhaniwala and David Goodman)
