The European Commission decided, on Wednesday 28 April, to fine Bank of America Merrill Lynch, Crédit Agricole and Crédit Suisse €28.49 million for breaching EU antitrust rules and for abuse of a dominant position. Deutsche Bank was not fined as it revealed the existence of the cartel to the Commission.
The four banks took 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.
For Margrethe Vestager, Commission Executive Vice-President responsible for Competition Policy, 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 or pensioners”.
Traders, who were in direct competition, typically logged into multilateral 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.
The investigation revealed that traders sometimes agreed: - to refrain from bidding or offering, or to remove (or “kill”) a bid or offer from the market; - to split trades between each other and combine or reduce their respective positions to meet a specific customer’s demand, without the customer being aware that it was dealing with more than one trader. Deutsche Bank received full immunity for revealing the cartel, thereby avoiding a fine of around €21.5 million. (Original version in French by Lionel Changeur)