EU fines banks €371m for bond trading cartel

By Mark McSherry

The European Commission has fined investment banks UBS, Nomura and UniCredit a total of €371 million for participating in a European governments bond (EGB) trading cartel between 2007 and 2011.

UBS was fined €172 million, Nomura was fined €129 million and UniCredit was fined €69 million.

The Commission said it found that Bank of America, Natixis, Nomura, RBS (now NatWest), UBS, UniCredit and WestLB (now Portigon) “breached EU antitrust rules through the participation of a group of traders in a cartel in the primary and secondary market for European Government Bonds.”

The Commission said: “NatWest received full immunity for revealing the cartel, thereby avoiding an aggregate fine of ca. 260 million.”

Bank of America and Natixis were not fined either “because their infringement falls outside the limitation period for imposition of fines.”

Portigon, the legal and economic successor of WestLB, “received a zero fine as it did not generate any net turnover in the last business year which served as a cap to the fine.”

The Commission said the seven investment banks participated in a cartel through a group of traders working on their EGB desks and operating in a “closed circle” of trust.

“These traders were in regular contact with each other mainly in multilateral chatrooms on Bloomberg terminals,” said the Commission.

“In these chatrooms, the relevant traders exchanged commercially sensitive information.

“They informed and updated each other on their prices and volumes offered in the run up to the auctions and the prices shown to their customers or to the market in general.

“They discussed and provided each other with recurring updates on their bidding strategy in the run up to the auctions of the Eurozone Member States when issuing Euro denominated bonds on the primary market, and on trading parameters on the secondary market.

“The conduct partially took place during the financial crisis and more specifically between 2007 and 2011, and affected the entire European Economic Area (‘EEA’).”

Executive vice-president of the Commission, Margrethe Vestager, in charge of competition policy said: “A well-functioning European Government Bonds market is paramount both for the Eurozone Member States issuing these bonds to generate liquidity and the investors buying and trading them.

“Our decision against Bank of America, Natixis, Nomura, RBS, UBS, UniCredit and WestLB sends a clear message that the Commission will not tolerate any kind of collusive behavior.

“It is unacceptable, that in the middle of the financial crisis, when many financial institutions had to be rescued by public funding these investment banks colluded in this market at the expense of EU Member States.”

In a statement, Nomura said: “Nomura Holdings, Inc. today announced that on May 20, the European Commission issued a Decision and associated fine of EUR 129,573,000 on the company and Nomura International plc, a U.K. subsidiary of the company, for the infringement of European Union competition law as a result of certain historic behavior by two former NI plc employees.

“The Commission found an infringement in respect of anti-competitive conduct in the European Economic Area for a period of approximately 10 months in 2011 in connection with the primary and secondary markets for European Government Bonds.

“After thoroughly examining the content of the decision, Nomura will consider all options, including an appeal.

“Nomura has already set aside a provision for the full amount of the fine and therefore the decision will not have a negative impact on the company’s consolidated results for the fiscal year ending March 2022.”

Bloomberg reported that UBS said the fine could hit its second-quarter results by as much as $100 million and that UBS is considering an appeal.

Bloomberg also reported that UniCredit “vigorously contests” the fine and will appeal to EU courts.

UniCredit maintains “that the findings do not demonstrate any wrongdoing.”