EU charges 13 banks, ISDA, Markit with breaching EU antitrust rules

Bank of America Merrill Lynch, Barclays and Morgan Stanley also among banks charged

Banks and other companies involved could be fined up to 10% of their global turnover if found guilty of infringing EU rules. Photo: Karen Bleier/AFP

Brussels: Financial data company Markit, the International Swaps and Derivatives Association (ISDA) and 13 banks were charged with blocking two exchanges from entering the credit derivatives market in the last decade in breach of European Union (EU) antitrust rules.

The European Commission said the group, which included Goldman Sachs and UBS, shut out Deutsche Boerse and the Chicago Mercantile Exchange from the Credit default swaps (CDS) business between 2006 and 2009.

CDS are over-the-counter contracts that allow an investor to bet on whether a company or country will default on its bonds within a fixed period of time. Lack of transparency on such derivatives is a key target of regulators following the 2007-2009 crisis.

The case is one of several opened by the EU antitrust regulator into the financial services since the crisis. Banks and other companies involved could be fined up to 10% of their global turnover if found guilty of infringing EU rules.

The European Commission said on Monday it had sent a statement of objections, or charge sheet, which sets out suspected anti-competitive activities, to the companies.

“It would be unacceptable if banks collectively blocked exchanges to protect their revenues from over-the-counter trading of credit derivatives,” EU competition commissioner Joaquin Almunia said.

“Over-the-counter trading is not only more expensive for investors than exchange trading, it is also prone to systemic risks.”

The charges followed a two-year investigation. The other banks charged are Bank of America Merrill Lynch, Barclays, Bear Stearns, BNP Paribas, Morgan Stanley, Credit Suisse, Deutsche Bank, HSBC, JP Morgan and RBS.

UBS, Deutsche Bank, JP Morgan, HSBC and Barclays declined to comment, while the other banks and ISDA were not immediately available for comment. Markit had no immediate comment.

Almunia said some of the banks in the CDS case were also involved in separate investigations into suspected rigging of lending benchmarks Euribor and Libor, but he did not identify them.

“We are trying to follow the Article 9 route. We hope we are ready to adopt a decision towards the end of the year,” EU competition commissioner Joaquin

Almunia told a news briefing, referring to a procedure where companies can get a 10% cut in fines in return for admitting wrongdoing. Reuters