Antitrust: Commission fines investment banks € 371 million for participating in a European Governments Bonds trading cartel

(Credit: Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has found that Bank of America, Natixis, Nomura, RBS (now NatWest), UBS, UniCredit and WestLB (now Portigon) have 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 (‘EGB’).

Fines totalling € 371 million are imposed on Nomura, UBS and UniCredit. NatWest was not fined as it revealed the cartel to the Commission. Bank of America and Natixis are 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.

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.

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. 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’).

The behaviour of the seven banks violates EU rules that prohibit anticompetitive business practices such as collusion on prices (Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement).

Together with previous cases involving cartels affecting the trading of financial instruments, today’s Decision demonstrates that the Commission remains determined to deal with anticompetitive practices in all markets, including the financial sector.

Fines

The fines were set on the basis of the Commission’s 2006 Guidelines on fines (see also MEMO).

In setting the level of fines, the Commission took into account, in particular, the sales value in the EEA achieved by the cartel participants for the products in question, the serious nature of the infringement, including that the cartel related to a Euro-based financial product on the primary and secondary market, its geographic scope and the respective duration of participation.

The fines imposed for the cartel are as follows:

CompanyDuration of participationFine (€)
Bank of America29.01.2007 – 06-11.2008N/A (outside limitation period)
Natixis26.02.2008 – 06.08.2009N/A (outside limitation period)
NatWest (RBS)04.01.2007 – 28.11.20110 (immunity from fines)
Nomura18.01.2011 – 28.11.2011129 573 000
UBS04.01.2007 – 28.11.2011172 378 000
UniCredit09.09.2011 – 28.11.201169 442 000
Portigon (WestLB)19.10.2009 – 03.06.20110 (fine capped to 10% of turnover)

Individual fines were reduced or not imposed for the following reasons:

  • NatWest received full immunity for revealing the cartel, thereby avoiding an aggregate fine of ca. 260 million
  • UBS was benefitted from reduction of its fine by 45% for its cooperation with the Commission investigation.
  • Portigon’s fine of 4 888 000 was reduced to zero because fines cannot exceed 10% of the total turnover and the undertaking did not generate any net turnover in the last business year.
  • No fines were imposed on Bank of America and Natixis, because these undertakings left the cartel more than five years before the Commission started its investigation. They therefore fall outside the limitation period for imposition of fines, but this does not prevent the Commission from establishing their participation in the infringement. Natixis cooperated with the Commission under the leniency program.

Background on European Government Bonds

European Government Bonds or EGB are debt securities issued in Euro by the central governments of the Eurozone Member States. The governments issue EGB to raise funds in international financial markets: they borrow money for a fixed term and predefined interest rate. The bond holder periodically receives the interest (coupon) and the principal amount at the agreed maturity date.

Bonds are first issued on the primary market where a limited number of investment banks, the ‘primary dealers’ can bid for the bonds in auctions or sometimes acquire them via syndication. The primary dealers then place and trade the bonds with other investors on the secondary market. These investors include other banks, asset managers, pension funds, hedge funds and major companies. They can hold the bonds as investments or further trade them via brokers like any other financial instrument.

Procedural Background

Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits cartels and other restrictive business practices, including collusion on purchasing prices.

The Commission’s investigation in this case started in July 2015 with an application under the Commission’s 2006 Leniency Notice submitted by NatWest (then named RBS).

Fines imposed on undertakings found in breach of EU antitrust rules are paid into the general EU budget. This money is not earmarked for particular expenses, but Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU and reduce the burden for taxpayers.

In accordance with the EU-UK Withdrawal Agreement, the Union continues to be competent for this case which was initiated before the end of the transition period (“continued competence case”). The EU shall reimburse the UK for its share of the amount of the fine once the fine has become definitive. The collection of the fine, the calculation of the UK’s share and the reimbursement will be carried out by the Commission.

More information on this case will be available under the case number AT.40324 in the public case register on the Commission’s competition website, once confidentiality issues have been dealt with. For more information on the Commission’s action against cartels, see its cartels website.

Action for damages

Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the cartel participants concerned, damages may be awarded without being reduced on account of the Commission fine.

The Antitrust Damages Directive, which Member States had to transpose into their legal systems by 27 December 2016, makes it easier for victims of anti-competitive practices to obtain damages. More information on antitrust damages actions, including a practical guide on how to quantify antitrust harm, is available here.

Whistleblower tool

The Commission has set up a tool to make it easier for individuals to alert it about anti-competitive behaviour while maintaining their anonymity. The tool protects whistleblowers’ anonymity through a specifically-designed encrypted messaging system that allows two way communications. The tool is accessible via this link.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

What changes in the EU as from today

America writes-off Iran, blocks Europe’s Tehran talks

This is how to speed up ocean-climate ambition towards COP26

Statement by Cecilia Malmström, Member of the EC in charge of Trade, on the successful conclusion of the final discussions on the EU-Japan Economic Partnership Agreement (EPA) – Brussels, 08 Dec 2017. (Copyright: European Union; Source: EC - Audiovisual Service; Photo: Georges Boulougouris)

The EU and Japan seal free trade pact that will cover 30% of global GDP

The moment of truth for global energy transition is here

UN chief reaffirms commitment to untying ‘Gordian knot’ of Middle East conflict and instability

Great Reset: Why LGBT+ inclusion is the secret to cities’ post-pandemic success

Thursday’s Daily Brief: STIs worldwide, food safety and food prices, updates on Iraq and East Africa

This is how AI can help you make sense of the world

3 reasons why most Africans aren’t on the internet – and how to connect them

Are e-cigarettes as safe as they claim to be?

New citizenship law in India ‘fundamentally discriminatory’: UN human rights office

What is the Internet of Things?

Hungary has made progress on greening its economy and now needs to raise its ambitions

Conflict of interest and misuse of EU funds: The case of Czech PM Babiš

COVID-19 could widen the digital gap. Here’s what’s needed now.

Data is the fuel of mobility. Don’t spill it for nothing

Why the UK government must do more to boost green revolution

Coronavirus emergency: here’s what we know so far

Brexit: With May gone the Tory divide is to sink the UK despite Brits wanting to ‘Remain’

Turkey: MEPs cut support by €70m due to no improvement in respect for EU values

Humanitarian aid: EU mobilises over €18 million for the Central African Republic in 2019

Cocaine and opium production worldwide hit ‘absolute record highs’ – major threat to public health says UN study

Million across Yemen ‘just a step away from famine’, with food available but inaccessible

38th ACP-EU Assembly: dialogue on cooperation challenges in Kigali

A Sting Exclusive: “Leading by example! EU must push for UN deal to avoid dangerous climate change”, European Parliament Vice-President Ulrike Lunacek cries out from Brussels

The ECB still protects the banks at the expense of the EU taxpayers

Governments, businesses ‘walk the talk’ for investment in sustainable development: UN forum

28 million elective surgeries may be cancelled worldwide: how non-COVID-19 medical care is suffering

Take action on air pollution to save lives, and the planet, urges UN chief

Renewed pressures on Berlin to adopt growth policies

Harnessing the power of nature in the fight against climate change

Aid spending fell in 2018, for the second year in a row

These are the benefits of learning a second language

Can collective action cure what’s ailing our food systems?

How supporting climate action on a local level can transform the world

EU launches €100 million humanitarian initiative to support COVID-19 vaccination campaigns in Africa

Improving Italy’s capital market will boost growth opportunities for Italian companies and savers

Is poverty and exclusion the necessary price for EU’s recovery?

The Indian miracle state pointing the way to global sustainability

EU job-search aid worth €9.9 million for 1,858 former Air France workers

How drones can manage the food supply chain and tell you if what you eat is sustainable

Nagorno-Karabakh: EU allocates additional €3 million in humanitarian aid for conflict-affected civilians

Northern Bahamas ravaged by ‘disaster of epic proportions’ as UN releases $1 million in emergency funds

Sustainable investment continues to gain momentum

EU-Japan relations: Foreign Affairs MEPs back Strategic Partnership Agreement

Asylum: more solidarity among EU member states and funds for frontline countries

Security Council hails ‘historic and significant’ joint peace declaration by Ethiopia and Eritrea

Parliament gives green light to EU-Singapore trade and investment protection deals

Lithuania finds the ways to maintain its energy security

The new EU “fiscal compact” an intimidation for all people

Let Nagasaki remain ‘the last city’ to suffer nuclear devastation says museum director, as UN chief arrives

New EU rules cut red tape for citizens living or working in another Member State as of tomorrow

“Our house is on fire.” 16 year-old Greta Thunberg wants action

This man ran across the USA to raise awareness of plastic pollution

This warehouse is one of the world’s greenest industrial buildings

FROM THE FIELD: Watering the parched farmland of São Tomé and Príncipe

Cédric in India

Why Eurozone can afford spending for growth

Early signs of growth in Eurozone?

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s