Deutsche Bank, Rabobank hit with bonds cartel complaint from EU

DEUTSCHE Bank and Rabobank received formal complaints from the European Union’s antitrust watchdog for their alleged roles in a cartel for euro-denominated bonds, setting them up for potential fines from the regulator.

The European Commission on Tuesday (Dec 6) said it sent the banks a so-called statement of objections laying out concerns that the banks colluded “to distort competition” in trading certain bonds issued by governments or agencies backed by them.

The EU has spent more than a decade probing how bank traders swapped information in chatrooms, leading to billions of euros in fines. The investigations followed its approval for billions of euros in government support to keep many European lenders alive during the financial crisis in the wake of the 2008 collapse of Lehman Brothers Holdings.

The two banks are suspected to have unlawfully “exchanged commercially sensitive information and coordinated their pricing and trading strategies when trading these bonds in the secondary market” in Europe through traders between 2005 and 2016. The commission said such exchanges “would have taken place mainly through emails and online chatroom communications.”

It’s the third EU investigation involving cartels affecting the market for bonds trading. In April 2021, the commission fined three investment banks a total of 28 million euros (S$39.9 million) for participating in a US Dollar-denominated SSA bonds trading cartel. In May 2021, it found that seven investment banks participated in a European government bonds trading cartel and imposed fines totalling 371 million euros.

Under EU rules, banks can potentially be fined as much as 10% of their revenue for antitrust breaches – though penalties rarely reach that high and the companies have a chance to fight the regulator’s preliminary findings in hearings and in writing. 

Deutsche Bank said in a statement it doesn’t expect to get a fine because it has “proactively cooperated” with the commission and “as a result has been granted conditional immunity.” 

Chief executive officer Christian Sewing is in the last month of a three-year turnaround programme that has boosted the lender’s profitability. However, he has had to scrap several cost targets, partly because he had to make substantial investments above the initial plan to fix the bank’s controls. 

A Rabobank spokesman said the lender “will be cooperating with the European Commission’s investigation on the matter” and declined to comment further. 

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The commission said it moved ahead with a formal complaint after talks on a potential settlement failed to yield results. BLOOMBERG