EU fines Bank of America Merrill Lynch, C. Agricole, Credit Suisse €28.5m

The behaviour of the banks reportedly violated EU rules that prohibit anticompetitive business practices such as collusion on prices

Photo: EPA

EU antitrust regulators on Wednesday fined Bank of America Merrill Lynch, Credit Agricole and Credit Suissea total of €28.5m ($34.4m) for taking part in a bond cartel, with Bank of America Merrill Lynch getting the biggest financial penalty.

”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 and pensioners. The cartel harmed the financial markets and today’s decision sends a clear message that the Commission will not tolerate any type of collusive behaviour,” commented in a statement the Executive Vice-President of the Commission Margrethe Vestager, in charge of competition policy.

Deutsche Bank, which was reportedly also involved, was not penalised because it alerted the cartel to the European Commission. Thereby she avoided a fine of around €21 500 000.

The EU competition watchdog said the cartel was operated in the European secondary trading market related to supra-sovereign, sovereign and agency (SSA) bonds denominated in US dollars.

A bond is a type of debt security that enables entities to raise cash. Bonds are issued on the primary market and then traded by financial institutions on the secondary market. On the secondary market, potential customers, such as investment and pension funds, approach the banks in order to get an independent quotation of price and quantity available of the bonds of a specific issuer. Bonds are distinguished by currency. This particular case refers to SSA bonds issued in US dollars.

The traders, who were in direct competition, typically logged into multilateral chatrooms 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 and affected the trading of US denominated SSA bonds on the secondary market in the entire EEA.

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, its geographic scope and the respective duration of participation.

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