Tuesday 23 January 2018

EU probes claims of credit trade collusion by major banks

Ben Moshinsky, Abigail Moses and Stephanie Bodoni

Thirteen of the world's biggest investment banks have been accused of colluding to curb competition in the $10trn (€7.7trn) credit derivatives industry.

The European Union sent a complaint to the 13 banks and data provider Markit Group as well as trade association the International Swaps & Derivatives Association (ISDA) over allegations that they sought "to prevent exchanges from entering the credit derivatives business between 2006 and 2009", the European Commission said.

The probe is one of several into the financial industry, including whether banks colluded to manipulate UK and European benchmark interest rates.

Joaquin Almunia, the EU Competition Commissioner, said he's seeking to settle the probes into Libor and Euribor with some of the same banks in the credit derivatives case by the end of the year.

DERIVATIVES

The EU is probing whether banks colluded by giving market information to data provider Markit, which is majority-owned by Wall Street's largest banks. Earlier this year, the EU extended its investigation to include ISDA, having found indications that it "may have been involved in a co-ordinated effort to delay or prevent exchanges" from entering the credit swaps business.

The banks in the credit derivatives probe are Goldman Sachs; JPMorgan Chase & Co; Citigroup; Credit Suisse; Deutsche Bank; Morgan Stanley; Barclays; Bank of America; HSBC; Royal Bank of Scotland; BNP Paribas; and UBS, the Commission said.

"I'm sure banks are desperate to keep these products from going on exchange and keep as much of the pie to themselves as they can," said Robert Kendrick, a credit analyst at Legal & General in London. "As an investor in banks, I'd be surprised if it makes a huge difference. As an investor in credit derivatives more generally, I'd like to see more transparency."

ISDA is co-operating with the EU and "is confident that it has acted properly at all times," the New York-based organisation said. (Bloomberg)

Irish Independent

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