June 7, 2023
In a startling report, the UK’s competition regulator, the CMA has found that five world-leading banks violated UK competition law by engaging in anti-competitive behaviour during the trading of British government bonds. The banks involved are Citigroup, Deutsche Bank, HSBC, Morgan Stanley, and Royal Bank of Canada. In this article, we’ll examine this event in depth and outline the main debate about the UK government ’s usage of competition law. 

What Happened?  

Five major banks, namely Citigroup, Deutsche Bank, HSBC, Morgan Stanley, and Royal Bank of Canada, engaged in illicit activities between 2009 and 2013. These traders unlawfully shared sensitive information on pricing and strategies through chat rooms on Bloomberg terminals. The information was exchanged in the context of government bond sales by the UK’s Debt Management Office and the repurchase of gilts by the Bank of England.

It was highlighted that they could have deprived market participants, including pension funds and the UK’s Debt Management Office, of the benefits of fair competition. A well-functioning bond market is essential for taxpayers and pension savers, and any anti-competitive behaviour can have far-reaching consequences.

What Are The Possible Outcomes?

The possible outcomes if the CMA concludes that at least two banks engaged in anti-competitive behaviour:

  1. The banks involved: possibility of fines. The fines imposed could be substantial, with the CMA having the authority to levy penalties up to 10% of a company’s global turnover in the relevant market. 
  2. Investors, such as pension funds, may pursue civil lawsuits seeking compensation for the impact of these actions.
  3. Appeal

 Stage 1: The Banks’ Responses

Alleged banks Standpoints (Admitted/Denied)  Actions
Deutsche Bank Admitted Alerted the CMA to the misconduct and will not be subject to fines as it has been granted provisional immunity. 
Citigroup Admitted Reached a settlement agreement with the CMA and probably leading to a discounted fine.
HSBC, Morgan Stanley, and Royal Bank of Canada Denied CMA’s probe is ongoing with provisional findings that are subject to review.

Stage 2: CMA’s Final Decision

Following the banks’ responses, the CMA will carefully consider all the information presented before making its final decision. This decision will determine whether the banks have indeed infringed competition law and the appropriate level of fines, if applicable.

 Stage 3: Appeal to the Competition Appeal Tribunal

If the banks are dissatisfied with the CMA’s final decision, they have the right to challenge it by filing an appeal with the Competition Appeal Tribunal. 

Stage 4: Complexities of the Appeal Process

The appeal process adds an extra layer of complexity to the overall procedure. It involves legal arguments, examination of evidence, and potential hearings where both parties present their case. 

The ability to appeal decisions ensures that there is a fair mechanism to address disputes regarding the CMA’s findings and the process shows the importance of due diligence, comprehensive evidence gathering, and a robust legal framework in addressing competition law violations. The banks will then have an opportunity to respond to the CMA’s findings. Ultimately, the final decision on whether competition law has been infringed and the level of fines will rest with the CMA. It is important to note that these decisions can be appealed to the Competition Appeal Tribunal, adding another layer of complexity to the process.


Keep Up With Current Affairs

Subscribe to our monthly newsletter to learn more about current affairs.

Sign Up Now

The Grey Area of UK Competition Law

The revelation of banks unlawfully sharing sensitive information raises questions about the effectiveness of UK competition law. Critics argue that banks have previously exploited loopholes in the law, using chat rooms and other means to gain an unfair advantage in the market. As a result, this suggests that such practices might have been an ‘open secret’ within the commercial world, potentially allowing these anti-competitive activities to persist unchecked.

Is It A Consequence Of The Economic Climate?

Another perspective on this issue is that the prevalence of such misconduct could be linked to the economic climate at the time. Following the COVID-19 pandemic and the Russian-Ukraine crisis, the UK inflation rate in October 2022 hit the highest inflation rate since 1981 and is currently facing a serious cost of living crisis. When the financial crisis hit in 2008, regulatory focus primarily centred on stabilising the banking sector, potentially leading to a lack of scrutiny regarding anti-competitive practices. As a consequence, the CMA’s investigation, which was opened in 2018, indicates a renewed effort to address past misconduct and ensure fair competition in the financial industry.

Key Takeaways

The CMA’s provisional findings of major banks violating UK competition law has sent shockwaves through the financial industry. This revelation raises concerns about the effectiveness of competition regulations and suggests a potential ‘open secret’ in the commercial world. However, it also signifies a shift in the regulatory approach, with the CMA demonstrating its resolve to tackle misconduct and maintain fair competition.

The banks involved will have the opportunity to respond to the findings before the CMA reaches a final decision and determines the appropriate level of fines. Additionally, potential civil lawsuits may arise from investors affected by this scandal. The outcome of this investigation will have significant implications for the reputation and integrity of the global financial hub that the UK aims to maintain.


Loading More Content