BofA Hit Hardest as EU Fines Bond-Trading Trio $34 Million

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Bank of America Corp. Credit Suisse Group AG and Credit Agricole SA were fined about 28.5 million euros ($34 million) by European Union regulators for colluding in chatrooms on trading of U.S. supra-sovereign, sovereign and agency bonds.

Bank of America got the largest individual penalty of 12.6 million euros, while Credit Suisse was fined 11.9 million euros and Credit Agricole was ordered to pay more than 3.9 million euros. Deutsche Bank AG participated in the cartel but dodged a potential penalty of about 21.5 million euros because it was the first to inform the EU about the illegal behavior.

“Traders colluded on trading strategies, exchanged sensitive pricing information and coordinated on prices,” Margrethe Vestager, the EU’s competition commissioner, said in an emailed statement on Wednesday. “The behavior of the investment banks restricted competition in a market in which investment and pension funds regularly buy and sell bonds on behalf of their investors and pensioners.”

While the fines may dent the reputations of the companies, they are far lower than previous EU cartels due to the small size of the U.S. dollar SSA trading market. Citigroup Inc., Royal Bank of Scotland Group Plc and JPMorgan Chase & Co. were among five banks that agreed in 2019 to pay EU fines totaling 1.07 billion euros for colluding on foreign-exchange trading strategies.

The traders called themselves “the Kumars” after a BBC TV comedy show. They chatted with each other on an almost daily basis on the Bloomberg terminal, switching from group chat groups to one-on-one messages and even phone calls after banks tried to curb communications with rivals in the wake of massive fines from previous traders’ cartels.

Credit Suisse “continues to believe that the single former employee” criticized by the EU decision “did not engage in anti-competitive conduct,” a bank spokesman said in a statement. The bank said it plans to appeal the fine decision and will “vigorously” defend its position.

Bank of America declined to comment. Credit Agricole didn’t respond to a request for comment.

EU Probes

EU enforcement has lagged far behind U.S. and U.K. financial authorities. EU officials are still probing Credit Suisse in a foreign-exchange rigging probe involving other banks. A separate bond cartel involving RBS and Nomura Holdings Inc. was given a formal EU hearing in 2019, a step that is usually a precursor to fines.

The bank employees swapped information on trading activities, exchanged commercially sensitive information, coordinated on prices shown to customers or to the market and aligned their trading activities on the secondary markets for the bonds between 2009 and 2015, the EU said.

The EU said they agreed to refrain or remove bids to stop competing with each other directly. They also split trades between each other and combined or reduced their positions to meet a customer’s demand. This was done without a customer’s knowledge of dealing with more than one trader “which meant that in practice the customer had limited choice,” the EU said.

Regulators said the fines show the EU “remains determined to deal with anticompetitive practices in all markets, including the financial sector.”

©2021 Bloomberg L.P.

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