Four global banks – Citi, HSBC Morgan Stanley and Royal Bank of Canada – have been fined a total of more that PS100mn in the UK by the Competition and Markets Authority. This follows an investigation into the sharing of sensitive information regarding gilt trading.
The regulator found that from 2008 to 2013, a small group of traders at banks participated in private Bloomberg Chat Rooms where they shared confidential information regarding the buying and trading of UK government bonds.
Deutsche Bank was included in the investigation that began in 2018. However, it escaped financial penalties by voluntarily disclosing their involvement to the authorities.
The CMA found no evidence of direct market impact but emphasized that such practices undermine market integrity and competition.
Early settlements are eligible for reduced fines and leniency
The fines were based on how well the banks cooperated with the regulator.
Royal Bank of Canada was fined the most, at PS34.2mn. Morgan Stanley received a PS29.7mn fine and HSBC a PS23.4mn fine.
Citi was given the lowest fine of PS17,2mn. This was after receiving a 35% discount for leniency and an additional 20% discount for settling early before the CMA released its formal statement of opposition.
Three banks — HSBC, Morgan Stanley and RBC — were granted a 10% penalty reduction for agreeing to settle, after the CMA raised concerns about their actions.
The regulator stated that if the banks had not taken significant steps to strengthen their internal compliance program, the fines would be significantly higher.
CMA to enforce competition rules in the financial sector
Juliette Enser is the executive director for competition enforcement at CMA. She said that the CMA’s penalties reflect its determination to enforce competition rules in the financial industry.
She said that the financial services sector was an integral part of UK’s economy, and contributed billions each year. It is essential that it functioned effectively.
“Only by creating a healthy and competitive market can we ensure that businesses and investors are confident to invest and grow, for the benefit of everyone in the UK.”
She said that, while banks have taken steps to prevent further breaches, the CMA is committed to combating anti-competitive behaviors.
Banks respond, highlight industry-wide changes
Since then, the banks have taken enhanced compliance measures in order to prevent similar incidents.
Morgan Stanley responded by stating that it settled the long-running case to end the investigation. It noted that the misconduct was committed by a former employee who worked for the company 15 years ago.
The bank stated that the CMA had not made any findings about the impact of the firm’s actions on the market, or its financial benefit.
Since the time in question the entire industry, including Morgan Stanley has undergone significant change, including enhanced oversight and compliance controls.
The CMA’s probe highlights the importance of strict compliance with competition laws on financial markets, especially in sectors that are vital to the economy.
This post UK banks hit by PS100M penalty for breaking gilt trading rules appeared initially on The ICD
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