EU fines banks €28m for bond-trading cartel

By Mark McSherry

The European Commission said it fined Bank of America Merrill Lynch, Crédit Agricole and Credit Suisse a total of €28.49 million for taking part in a cartel in the secondary trading market within the European Economic Area of Supra-sovereign, Sovereign and Agency (SSA) bonds denominated in US dollars.

Bank of America was fined €12.6 million, Credit Suisse was fined €11.8 million and Credit Agricole was ordered to pay more than €3.9 million.

Deutsche Bank took part in the cartel but avoided a fine of €21.5 million because it revealed the existence of the cartel to the Commission.

“The four investment banks participated in a cartel through a core group of traders working in their USD SSA bonds divisions, who were in regular contact with each other,” said the Commission.

“A bond is a type of debt security that enables entities to raise cash. Bonds are issued on the primary market and then traded by financial institutions on the secondary market.

“On the secondary market, potential customers, such as investment and pension funds, approach the banks in order to get an independent quotation of price and quantity available of the bonds of a specific issuer.

“Bonds are distinguished by currency. This particular case refers to SSA bonds issued in US dollars.

“The traders, who were in direct competition, typically logged into multilateral chatrooms or bilateral chatrooms on Bloomberg terminals.

“They knew each other on a personal basis, thus creating a closed circle of trust.

“They provided each other with recurring updates on their trading activities, exchanged commercially sensitive information, coordinated on prices shown to their customers, or to the market in general and aligned their trading activities on the secondary market for these bonds.

“The conduct took place during a five-year period and affected the trading of US denominated SSA bonds on the secondary market in the entire EEA.”

Executive Vice-President of the Commission Margrethe Vestager, in charge of competition policy said: “Today we have issued a decision against Bank of America Merrill Lynch, Crédit Agricole, Credit Suisse and Deutsche Bank, whose traders colluded on trading strategies, exchanged sensitive pricing information and coordinated on prices.

“The behaviour of the investment banks restricted competition in a market in which investment and pension funds regularly buy and sell bonds on behalf of their investors and pensioners.

“The cartel harmed the financial markets and today’s decision sends a clear message that the Commission will not tolerate any type of collusive behaviour.”