Four major banks, including HSBC, Citigroup, Royal Bank of Canada (RBC), and Morgan Stanley, have been fined a total of £104.4 million after it was discovered their traders exchanged sensitive market information between 2009 and 2013.
The UK’s Competition and Markets Authority (CMA) stated the traders used private chat rooms to discuss buying and selling UK government bonds. Such discussions were deemed to have restricted or distorted competition, impacting the market negatively.
The highest fine was imposed on RBC, which was penalized £34.2 million, followed by Morgan Stanley at £29.7 million, HSBC at £23.4 million, and Citigroup at £17.2 million. All four banks received reductions on the penalties after agreeing to settlements, with Citigroup receiving the largest concession for settling first.
A fifth bank, Deutsche Bank, managed to avoid any penalties entirely by voluntarily reporting its involvement to regulators, which granted it immunity under the CMA's leniency program.
Juliet Insher, the CMA's CEO of enforcement, emphasized the significance of this case, stating, “This case highlights the importance of fair competition in the financial sector.” Insher added, “The financial services sector is integral to the UK economy, contributing billions of dollars each year, and it is imperative it operates effectively. The fines imposed today reflect our commitment to addressing violations of competition law.”
The misconduct was recorded during a pivotal recovery period for financial institutions, as the Bank of England was purchasing government bonds as part of its response to the 2008 financial crisis. The timeframe of violations varied among banks, with HSBC recording its last breach in 2010 and Morgan Stanley’s last transaction noted to be in 2012.
According to the CMA, RBC and Deutsche Bank traders shared market-sensitive information on the highest number of instances, totaling 41 occasions during this period. Subsequently, the banks have implemented compliance measures to prevent similar misconduct, taking steps even before the CMA’s investigation commenced back in 2018.
While this enforcement action marks another setback for the reputation of global financial institutions, regulators see it as a deterrent against any future improper conduct within bond markets.