Credit Suisse, Bank of America, Credit Agricole Fined by EU for Bond-Trading Cartel
The European Union fined Credit Suisse Group AG CS +1.46% , Bank of America Corp. BAC +0.53% and Crédit Agricole SA for illegally colluding on trades in government bond markets at the expense of their clients.
The three banks were together fined €28.5 million,
equivalent to $34.4 million. Deutsche Bank AG DB +10.32% also participated in
the trades, but wasn’t fined because it alerted the EU about the existence of
the alleged cartel.
The EU’s executive arm said Wednesday that traders at the
banks worked together on trading strategies, exchanged sensitive price
information and coordinated prices for sovereign bonds denominated in dollars.
“The cartel harmed the financial markets,” said Margrethe
Vestager, executive vice president of the European Commission. She said the
trading restricted competition when fund managers bought and sold bonds on
behalf of investors and retirees.
The trading took place in secondary markets, where bonds are
bought and sold between banks and investors after they have been issued. The
issuers include European institutions, governments and agencies such as the
European Investment Bank and German state, as well as non-European sovereign
and agency issuers.
By communicating confidential trading information over
Bloomberg terminal chat rooms, they avoided competing with each other and split
trades without their clients being aware that they were dealing with more than
one trader.
The commission began its investigation in 2015 after being
tipped off by Deutsche Bank. The collusion took place between 2010 and 2015.
Investment banks have been fined for financial markets
collusion in recent years, including trades involving the Libor benchmark
interest rate and currencies. This has led to sizable penalties and an
industrywide shift away from the use of benchmarks that can easily be rigged.
Credit Suisse was fined €11.9 million. A spokesperson said
the case related to a former employee whom it says didn’t engage in
anticompetitive conduct. It plans to appeal the decision in European courts.
The move from the EU is the latest black mark for Swiss
lender, which has come under fire in recent weeks for its involvement in the
collapse of finance firm Greensill Capital and for posting a $5.5 billion hit
from the meltdown of family office Archegos Capital Management, the highest any
bank has divulged to date. The bank has come under scrutiny from regulators and
top shareholders for failures to manage risk.
Bank of America, which was fined €12.6 million, declined to
comment. Crédit Agricole, which was fined almost €4 million, didn’t immediately
respond to requests for comment.
By informing the EU of the cartel, Deutsche Bank avoided a
€21.5 million fine. A bank spokesperson said it is “pleased that the matter has
now been concluded.”
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