U.K. Watchdog Fines Global Banks Over Information Sharing on Government Bonds

The Competition and Markets Authority (CMA) in the United Kingdom has fined four global banks a total of £104.5 million for unlawfully sharing competitively sensitive information about government bonds. The banks involved are Citi, HSBC, Morgan Stanley, and Royal Bank of Canada (RBC). Deutsche Bank, which was also involved, was granted immunity for cooperating with the investigation.

The CMA found that traders at these banks shared pricing and other aspects of their trading strategies for UK government bonds (gilts) and gilt asset swaps in one-to-one Bloomberg chatrooms between 2009 and 2013. This information exchange occurred in the context of government bond sales by the UK Debt Management Office, subsequent buying and selling of gilts and gilt asset swaps, and buy-back auctions of gilts by the Bank of England.

By sharing competitively sensitive information, the banks could have denied the full benefits of competition to those they traded with, including pension funds, the UK Debt Management Office, and ultimately HM Treasury and UK taxpayers. This could have led to higher borrowing costs for the UK government and reduced returns for investors.

The CMA's investigation found that Deutsche Bank alerted the authority to its participation in the alleged unlawful behavior under the CMA's leniency policy. Citi applied for leniency during the investigation and entered into a settlement agreement with the CMA. As a result, both banks received discounted fines. HSBC, Morgan Stanley, and RBC have not admitted any wrongdoing, and the CMA's probe is ongoing.

Michael Grenfell, Executive Director of Enforcement at the CMA, stated that the banks' actions could have denied taxpayers, pension savers, and financial institutions the benefits of full competition for these products, including the minimisation of borrowing costs. He added that a properly functioning, competitive bond market is crucial for the UK's reputation as a global financial hub.



The fines imposed on the banks are as follows:

* Citi: £17.2 million (reduced fine after applying for leniency)
* HSBC: £23.4 million
* Morgan Stanley: £29.7 million
* RBC: £34.2 million

The CMA's findings are provisional, and the banks have the opportunity to make further representations before a final decision is reached. If the CMA concludes that at least two banks engaged in anti-competitive behavior, it may issue additional fines.

This investigation highlights the importance of maintaining a competitive and transparent market for government bonds, which is essential for the UK's financial stability and the interests of taxpayers and investors. The CMA's enforcement actions serve as a reminder that anti-competitive behavior will not be tolerated and that market participants must comply with competition law.



In conclusion, the CMA's fines against Citi, HSBC, Morgan Stanley, and RBC underscore the importance of maintaining a competitive and transparent market for government bonds. The investigation serves as a reminder that anti-competitive behavior will not be tolerated, and market participants must comply with competition law to ensure the integrity of the market and the interests of all stakeholders.