CMA reaches settlement with banks in competition case

Gilts are an important type of UK government bond that help to finance public spending. Investors in gilts lend money to the UK government and in return receive a steady and stable stream of cash interest payments.

Healthy competition drives investment, innovation and growth, and it is important that competitors decide their price and strategies independently in order to ensure effective competition in a market. 

Following an investigation by the Competition and Markets Authority (CMA), the banks have agreed to pay fines for specific instances in which traders shared competitively sensitive information about aspects of the pricing of UK bonds. The sharing of information occurred in one-to-one exchanges between traders about the buying and selling of gilts and gilt asset swaps.

This conduct took place on various dates between 2009-2013, with the last exchanges occurring in 2010 for HSBC, 2012 for Morgan Stanley, and 2013 for each of Citi, Deutsche Bank and Royal Bank of Canada. Since then, the banks have implemented extensive compliance measures to ensure this behaviour does not happen again.

Juliette Enser, Executive Director of Competition Enforcement at the CMA, said:

Following constructive engagement between the banks and the CMA, we are pleased that we have been able to settle these 5 cases involving the past sharing of competitively sensitive information about pricing.

The financial services sector is an integral part of the UK economy, contributing billions every year, and it’s essential that it functions effectively. 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.

The fines imposed today reflect the CMA’s commitment to dealing with competition law breaches and deterring anti-competitive conduct. The fines would have been substantially higher had the banks not already taken unusually extensive steps to make sure that this doesn’t happen again.

Unlawful exchanges in one-to-one chatrooms

Each of the exchanges took place in separate bilateral online Bloomberg chatrooms between individual traders at 2 banks [see Figure 1] and included information relevant to the pricing of UK government bonds – specifically, gilts and gilt asset swaps.

In particular, each one-to-one exchange of information took place in relation to one or more of the following: firstly, the sale of gilts by the UK Debt Management Office via auctions on behalf of HM Treasury, secondly the subsequent buying and selling, i.e. trading, of gilts and gilt asset swaps, and thirdly the selling of gilts to the Bank of England – known as ‘buy back’. Not all banks were involved in unlawful exchanges in all 3 contexts.

Figure 1 – Parties to the separate one-to-one exchanges

Consequences

Four banks – Citi, HSBC, Morgan Stanley and Royal Bank of Canada – have settled and agreed to pay fines totalling £104,460,000.

Deutsche Bank is exempt from a financial penalty as it alerted the CMA to its participation in the chats via the authority’s leniency policy. Citi applied for leniency during the CMA’s investigation and as a result has received a reduced fine.

In agreeing to settle with the CMA, the banks have agreed to pay these fines, bringing the investigation to a close.

The fines for each bank are:

• Citi: £17,160,000 – this includes a 35% leniency discount and a 20% reduction for settling in advance of the CMA issuing its Statement of Objections
• HSBC: £23,400,000 – this includes a 10% reduction for settling after the CMA issued its Statement of Objections
• Morgan Stanley: £29,700,000 – this includes a 10% reduction for settling after the CMA issued its Statement of Objections
• Royal Bank of Canada: £34,200,000 – this includes a 10% reduction for settling after the CMA issued its Statement of Objections

The fines take into account the length of time that has passed since the end of the infringements and the extensive compliance measures that the banks have implemented since then – some of which were in place before the start of the CMA’s investigation.

The firms have until 22 April 2025 to pay their fines.

More information on this investigation and the CMA’s update is available on the UK government bonds: suspected anti-competitive arrangements case page.

Notes to editors

1. A gilt is a UK government bond issued by HM Treasury through the UK Debt Management Office (‘DMO’). This case concerned conventional gilts only, i.e. gilts that pay a fixed rate of interest to the holder. Gilts are commonly issued through auction by the DMO in the UK to gilt-edged market makers (‘GEMMs’) and are actively traded in the financial market following issuance. All 5 banks investigated by the CMA are GEMMs.
2. In 2009, in response to the financial crisis, the Bank of England adopted a quantitative easing (‘QE’) policy, which involved the Bank of England buying assets – the majority of which were gilts. The Bank of England therefore conducted regular buy-back auctions at certain points during the relevant period.
3. The DMO, the Bank of England and HM Treasury were not under investigation. The DMO, on behalf of HM Treasury, and the Bank of England have assisted the CMA with the investigation by responding to information requests.
4. The CMA has issued five separate bilateral infringement decisions. Decision documents are addressed to the following entities: Citigroup Global Markets Limited and its ultimate parent company Citigroup Inc. (together ‘Citi’), Deutsche Bank Aktiengesellschaft (‘Deutsche Bank’), HSBC Bank Plc and its ultimate parent company HSBC Holdings Plc (together ‘HSBC’), Morgan Stanley & Co. International Plc and its ultimate parent company Morgan Stanley (together ‘Morgan Stanley’), and RBC Europe Limited and its ultimate parent company Royal Bank of Canada (together ‘Royal Bank of Canada’).
5. In each decision, the CMA has found a single and repeated ‘by object’ infringement (i.e. that the conduct had, as its object, the restriction or distortion of competition within the UK). The CMA has not made any finding as to whether the conduct at issue had the effect of preventing, restricting or distorting competition.
6. The information exchanges took place between:
   – Citi and Deutsche Bank: on 12 specific dates between July 2012 and January 2013
   – Citi and Morgan Stanley: on 3 specific dates between December 2011 and February 2012
   – Deutsche Bank and HSBC: on 12 specific dates between October 2009 and June 2010
   – Deutsche Bank and Morgan Stanley: on 8 specific dates between October 2009 and June 2011
   – Deutsche Bank and Royal Bank of Canada: on 41 specific dates between November 2009 and April 2013
7. In the case of 4 of the banks (Citi, Deutsche Bank, HSBC and Morgan Stanley) the information was exchanged by a single trader based in the UK. In the case of the Royal Bank of Canada, the information was exchanged on different occasions by 2 traders based in the UK. None of the traders remain employed by the bank they worked for at the time.
8. Bloomberg chatrooms are a means of electronic communication through which participants can exchange messages. Although the information exchanged through certain Bloomberg chatrooms formed part of the CMA’s investigation, Bloomberg was not under investigation.
9. All banks were involved in unlawful exchanges relating to trading. In addition, Citi, Deutsche Bank, HSBC and Morgan Stanley were involved in unlawful exchanges relating to auctions; and Deutsche Bank, Citi and Morgan Stanley were involved in unlawful exchanges relating to buy-back auctions. Deutsche Bank and RBC also coordinated their strategies for trading gilts via brokers on a limited number of occasions.
10. Under the CMA’s leniency policy, a business that has been involved in cartel activity may be granted immunity from penalties or a reduction in penalty in return for reporting the cartel activity and assisting the CMA with its investigation.
11. A party under investigation by the CMA may enter into a settlement agreement if it is prepared to admit that it has breached competition law, is willing to pay a fine and agree to a streamlined administrative procedure for the remainder of the investigation. Settlement can take place before or after the CMA issues a Statement of Objections, which sets out the CMA’s provisional findings of fact and its legal and economic assessment of them.
12. The CMA and the Financial Conduct Authority have concurrent functions to enforce competition law in the financial services sector. It was agreed that the CMA would exercise those functions in relation to this investigation.
13. For media enquiries, contact the CMA press office on 020 3738 6460 or press@cma.gov.uk.