CMA fines four UK banks over gilt information sharing

Following an investigation into the four financial institutions, the UK’s competition regulator revealed that employees leveraged Bloomberg chat rooms to share sensitive information on gilt trading. The conduct took place between 2009 and 2013. At the time of writing, Citi, HSBC, Morgan Stanley, and Royal Bank of Canada agreed to pay the fines totalling over GBP 100 million, with each of them settling separate cases with the CMA.

Regarding HSBC, the bank also received an official warning from the CMA back in January 2023 for failing to provide the correct information about its Open Banking processes. At that time, the financial institution published multiple times improper data about charges, rates, and fees, including details about loan eligibility across more than 50 instances. The actions were a direct breach of the PSD2 Open Banking regulatory framework, which required banks to share services, products, and solutions information accurately via the Open Banking APIs.

The CMA’s investigation and actions

According to the CMA, a small number of traders from the four financial institutions also participated in the illicit exchanges by sharing sensitive information in one-on-one Bloomberg chats about the pricing of UK government bonds. Besides Citi, HSBC, Morgan Stanley, and Royal Bank of Canada, Deutsche Bank was also investigated by the regulator in 2018, however, it received immunity for reporting its conduct. This is a common practice under the regulator’s leniency policy, where a business that has been involved in illicit activity supports an investigation.

Citi, Deutsche Bank, HSBC, and Morgan Stanley each had one UK trader sharing details in bilateral Bloomberg chats, while the Royal Bank of Canada had two. The CMA mentioned that none of the traders are still employed by the banks. The majority of the information shared related to pricing in gilt auctions. Additionally, Deutsche and RBC had the highest volume of messages, with traders exchanging details on 41 dates between November 2009 and April 2013.

Furthermore, Citi and Deutsche Bank came clean regarding their involvement before the CMA released its provisional findings in 2023. However, HSBC, Morgan Stanley, and the Royal Bank of Canada did not admit to any misconduct. At that time, in a statement provided to the Financial Times, the two banks underlined their disagreement with the regulator’s findings, while HSBC countered the allegations.

HSBC, Morgan Stanley, and the Royal Bank of Canada received a 10% reduction in penalties for settling after the CMA raised its objections. On the other hand, Citi obtained a 55% reduction, mostly due to it settling before the regulator issued its objections. Representatives from the CMA underlined that the fines would have been higher if the banks had not already taken extensive steps to ensure these wrongdoings do not happen again. Also, all of the banks involved mentioned that their compliance substantially increased since the incidents happened.