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The UK regular has levied fines of more than GBP 100 million on four global financial institutions but on…
The UK regular has levied fines of more than GBP 100 million on four global financial institutions but only time will tell whether the penalties will deter future misconduct.
The UK’s Competition and Markets Authority (CMA) has reached a settlement with four major banks following an investigation into anti-competitive practices in the UK government bond market. Citi, HSBC, Morgan Stanley and the Royal Bank of Canada have agreed to pay fines exceeding GBP 100 million after it was revealed that individual traders had engaged in the exchange of sensitive information related to UK government bonds, commonly known as gilts, which play a critical role in financing public spending in the United Kingdom. Deutsche Bank, however, was granted immunity from financial penalties after voluntarily disclosing its involvement under the CMA’s leniency policy.
PRIVATE CHATROOMS
The CMA’s investigation found that between 2009 and 2013 – when the financial crash of 2008 was fresh in the memory and the banking sector was being roundly blamed for lining its own pockets at the expense of its customers – individual traders at the implicated banks communicated with each other in private one-to-one chatrooms. These traders exchanged competitively sensitive information regarding the pricing and trading of gilts and gilt asset swaps and, while not every institution participated in every form of misconduct, the pattern of behaviour revealed a consistent disregard for fair competition.
Juliette Enser, executive director of competition enforcement at the CMA, commented on the settlement, stating: “Following constructive engagement between the banks and the CMA, we are pleased that we have been able to settle these five cases involving the past sharing of competitively sensitive information about pricing.”
“Only through healthy and competitive markets can we ensure businesses and investors have confidence to invest and grow – for the benefit of all in the UK,” she added.
HM TREASURY
The exchange of information between traders primarily concerned three key aspects of the gilt market. First, some discussions were related to the sale of gilts conducted by the UK Debt Management Office through auctions on behalf of HM Treasury. Second, traders exchanged information on the secondary market trading of gilts and gilt asset swaps. Lastly, some discussions pertained to the process by which gilts were sold back to the Bank of England, commonly known as a ‘buy back’ operation.
The penalties imposed by the CMA vary based on the degree of cooperation shown during the investigation and the timing of their settlements. Citi, which had applied for leniency during the investigation, received a reduced fine of GBP 17,160,000, benefiting from a 35% discount for cooperation and a 20% reduction for settling before the CMA issued its Statement of Objections. HSBC was fined GBP 23,400,000, Morgan Stanley received a penalty of GBP 29,700,000 and the Royal Bank of Canada was ordered to pay £34,200,000.
EXTENSIVE SAFEGUARDS
In its statement, the CMA made it clear that the fines imposed would have been considerably higher had the banks not already taken proactive steps to strengthen their compliance frameworks, many of which were implemented prior to the initiation of the investigation. The affected institutions have since introduced extensive safeguards to ensure that such breaches do not recur, which they claim demonstrate their commitment to fair competition within the financial services sector.
The deadline for the banks to settle their fines has been set for 22 April 2025, bringing an end to a prolonged investigation that spanned several years.
However, whether the fines will serve as any sort of deterrent against future malfeasance remains to be seen. The penalties represent a tiny percentage of the global financial powerhouses’ annual income, with HSBC alone reporting a 2024 pre-tax profit of USD 32.3 billion, casting some doubt on whether the sort of regulatory action taken by CMA will have any impact at all on individuals who can make eye-watering sums of money by bending the rules.
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