EU Clears Eight of the 10 Banks Barred From Landmark Bond Sales

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Eight of the 10 banks blocked from participating in the European Union’s pandemic recovery bond sales this week have been cleared for future ones, reopening a lucrative line of business from one of the world’s largest new issuers.

Firms including JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Barclays Plc had been prevented from participating in Tuesday’s 20 billion euro ($24 billion) sale of bonds tied to the financing of the EU’s economic recovery due to previous breaches of antitrust rules. The eight banks now cleared were informed Friday that they would be eligible as potential syndicate members to help conduct future sales.

“The eight banks have provided information that allow the Commission to conclude that their further exclusion from participation in syndicated transactions in EU bond issuances is not warranted,” the European Commission said in emailed comments.

NatWest Group Plc and Natixis SA are the two banks still engaging with the EU on their remedial measures, people familiar with the matter said. Natixis and NatWest declined to comment. Deutsche Bank AG, Nomura Holdings Inc., UniCredit SpA and Credit Agricole SA are the other banks to have been cleared.

Swift Reversal

The move marks a swift reversal after the firms missed out on this week’s deal because of the temporary ban. It was the first time the bloc had committed to such a course of action since it started selling social debt last year, while only a handful of countries have initiated similar action in the past.

Syndications -- where banks underwrite the borrowing of countries or corporations -- are typically profitable transactions for investment banks. And with the EU issuing up to 800 billion euros of debt over the next five years, sending the bloc skyrocketing up the list of biggest issuers, missing out on sales had the potential to harm bottom lines and even banker bonuses. One fund manager had described the issuance as a “cash cow” for banks.

Tuesday’s 20-billion euro issuance by the bloc -- the largest amount the EU has raised in a single transaction -- may have generated more than $20 million in fees, according to estimates by Bloomberg.

On Friday, the EU sent out a Request for Proposal for the second debt sale under the NextGenerationEU program, which is expected to become before the end of the month. A further sale is due by the end of July, while bonds will also be auctioned from September. The bloc plans to sell bills and green bonds as well.

The amount of EU bonds that dealer banks have sold this year typically amounts to more than 10% of their transactions in other European bonds, based on data compiled by Bloomberg. The omitted banks had stayed on the list of 39 primary dealers eligible to take part in future auctions.

©2021 Bloomberg L.P.

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