Citi, HSBC, Morgan Stanley, RBC fined £104.5m for bond info sharing

Britain’s Competition and Markets Authority (CMA) imposed a total fine of 104.5 million pounds ($132.4 million) on Citi, HSBC, Morgan Stanley (NYSE:MS), and the Royal Bank of Canada for the illicit exchange of sensitive information regarding UK government bonds, known as gilts.

The CMA concluded that the traders from these banks shared competitively sensitive information in Bloomberg chatrooms between 2009 and 2013, following the global financial crisis.

The CMA’s investigation, which began in 2018, initially found the four banks and Deutsche Bank (ETR:DBKGn) in breach of competition rules in May 2023. Deutsche Bank, having admitted to anti-competitive activity alongside Citi, was granted immunity from the fines after it alerted the CMA to the misconduct.

The traders involved in the exchange of information discussed UK Debt Management Office auctions, subsequent gilt transactions, and Bank of England auctions, which were crucial to the UK economy’s recovery post-crisis.

Citi, in a statement, expressed contentment with the resolution of the matter, highlighting full cooperation with the CMA and a commitment to regulatory compliance. Morgan Stanley attributed the issue to the actions of a former employee and noted significant industry changes, including better supervision and compliance controls since then.

HSBC pointed out that the CMA’s probe was related to a limited number of communications with Deutsche Bank from 2009-2010 and emphasized its transformed controls and robust compliance program.

Deutsche Bank acknowledged its proactive reporting of the issue and full cooperation with the investigation. RBC also stated that it had significantly improved its compliance systems and that the two employees involved were no longer with the bank.

Juliette Enser, CMA’s executive director of competition enforcement, emphasized the fines’ role in addressing breaches of competition law and deterring anti-competitive behavior. She noted that the penalties would have been higher if the banks had not taken extensive measures to prevent future violations.

Of the total fines, RBC received the largest at 34.2 million pounds, followed by Morgan Stanley with 29.7 million pounds and HSBC with 23.4 million pounds. These banks received a 10% discount for settling post-CMA’s Statement of Objections.

Citi’s fine amounted to 17.16 million pounds, reflecting a 35% leniency discount and a 20% reduction for settling early. The exchange rate at the time of the fines was $1 equal to 0.7891 pounds.

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