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| European commission suspects banks of collusion over credit default swaps | |
| (35 minutes later) | |
| Banks including Barclays, Royal Bank of Scotland and HSBC could face fines from the European Commission after its competition watchdog alleged they had colluded to prevent new entrants participating in potentially lucrative financial contracts. | Banks including Barclays, Royal Bank of Scotland and HSBC could face fines from the European Commission after its competition watchdog alleged they had colluded to prevent new entrants participating in potentially lucrative financial contracts. |
| RBS and HSBC were among 13 banks cited by the competition authority along with data provider Markit and the industry group the International Swaps and Derivatives Association (ISDA). | RBS and HSBC were among 13 banks cited by the competition authority along with data provider Markit and the industry group the International Swaps and Derivatives Association (ISDA). |
| The commission alleged that between 2006 and 2009 two exchanges, Deutsche Börse and the Chicago Mercantile Exchange, tried to enter the credit derivatives business but were not able to obtain the necessary licences from ISDA and Markit, which compile the benchmarks and data associated with credit default swaps. The market for CDS – which provide a type of insurance against a country or company defaulting on its debt – has grown rapidly and the latest data values it at more than €10tn (£8.5tn). | The commission alleged that between 2006 and 2009 two exchanges, Deutsche Börse and the Chicago Mercantile Exchange, tried to enter the credit derivatives business but were not able to obtain the necessary licences from ISDA and Markit, which compile the benchmarks and data associated with credit default swaps. The market for CDS – which provide a type of insurance against a country or company defaulting on its debt – has grown rapidly and the latest data values it at more than €10tn (£8.5tn). |
| Joaquín Almunia, the commission vice president in charge of competition policy, said the EC's preliminary conclusion alleged that the banks controlling ISDA and Markit had only allowed licences to be issued for "over the counter" trading between banks rather than on exchanges such as Deutsche Börse and CME. | Joaquín Almunia, the commission vice president in charge of competition policy, said the EC's preliminary conclusion alleged that the banks controlling ISDA and Markit had only allowed licences to be issued for "over the counter" trading between banks rather than on exchanges such as Deutsche Börse and CME. |
| "It would be unacceptable if banks collectively blocked exchanges to protect their revenues from over-the-counter trading of credit derivatives. Over-the-counter trading is not only more expensive for investors than exchange trading, it is also prone to systemic risks," Almunia said. | "It would be unacceptable if banks collectively blocked exchanges to protect their revenues from over-the-counter trading of credit derivatives. Over-the-counter trading is not only more expensive for investors than exchange trading, it is also prone to systemic risks," Almunia said. |
| The sending of the so-called statement of objectives does not prejudge the final outcome of the two year investigation. | The sending of the so-called statement of objectives does not prejudge the final outcome of the two year investigation. |
| Almunia later told Reuters that EU regulators were also trying to settle with a group of banks being investigated for rigging Libor and its eurozone equivalent Euribor, under a procedure which allows banks to admit wrongdoing and accept lower fines. Some of the same banks listed in the credit default swap investigation – Bank of America Merrill Lynch, Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Royal Bank of Scotland, UBS – were also involved in the Euribor cases, he said. | |
| "We hope we are ready to adopt a decision towards the end of the year," Almunia told Reuters. ISDA said it was "confident that it has acted properly at all times and has not infringed EU competition rules" while Markit declined to comment. | |
| The next stage of the investigation is for companies to defend their positions by examining the commission's file. If the commission concludes there is evidence of an infringement it can fine companies up to 10% of their worldwide turnover. | The next stage of the investigation is for companies to defend their positions by examining the commission's file. If the commission concludes there is evidence of an infringement it can fine companies up to 10% of their worldwide turnover. |
| The Financial Conduct Authority, the UK's new City regulator, also warned banks and other financial institutions they could face fines and other regulatory action for potentially breaking rules on money laundering and suspicious transactions. A review of 17 banks had found they had not taken enough precautions to cover money laundering and terrorist financing risk when facilitating a specific area of their business, known as trade financing. | The Financial Conduct Authority, the UK's new City regulator, also warned banks and other financial institutions they could face fines and other regulatory action for potentially breaking rules on money laundering and suspicious transactions. A review of 17 banks had found they had not taken enough precautions to cover money laundering and terrorist financing risk when facilitating a specific area of their business, known as trade financing. |