UBS, Nomura Fined $450 Million For Bond Cartel Chatroom Collusion

As if having clueless prime brokers who just cost them hundreds of millions in losses wasn’t enough, on Thursday morning Nomura and UBS, both of which were hammered by the Archegos implosion, were hit with another heft fine totaling 371 million euros ($452 million) by the European Union for colluding on euro government bond trading during the region’s sovereign debt crisis.

UBS was fined €172 million and Nomura will have to pay €129.6 million for participating in a traders’ cartel that swapped commercially sensitive information from 2007 to 2011 when eurozone bond yields soared; UniCredit was fined 69 million euros, according to Bloomberg.

Today’s fines are the culmination of the EU spending the past decade probing how bank traders swapped information in chatrooms. At the same time it approved billions of euros in government support to keep many European lenders alive during the financial crisis.

The EU said traders on European government bond desks were in regular contact, mainly on Bloomberg terminal chatrooms, where they “informed and updated each other on their prices and volumes offered in the run-up” to eurozone government bond auctions “and the prices shown to their customers or to the market in general.”

Citigroup, RBS and JPMorgan were among five banks that agreed in 2019 to pay EU fines of over 1 billion euros for colluding on foreign-exchange trading strategies. Bank of America, Credit Suisse and Credit Agricole were fined about 28.5 million euros last month over chatrooms where traders swapped information on trading of U.S. supra-sovereign, sovereign and agency bonds. The EU is still investigating some banks for a related cartel.

It was “unacceptable, that in the middle of the financial crisis, when many financial institutions had to be rescued by public funding these investment banks colluded in this market at the expense of EU member states,” Margrethe Vestager, the EU’s antitrust chief, said in an emailed statement according to Bloomberg. Her criticism appears to have been aimed at two banks that weren’t fined. A Royal Bank of Scotland Group unit escaped a fine because it was the first to tell regulators. It received a U.K. bailout in 2008. Portigon, the successor bank to bailed-out and failed German lender WestLB, avoided a levy because it had no revenue last year.

Bank of America Corp. and Natixis SA participated in the cartel but weren’t fined because they had quit the cartel five years before the EU started its probe. While the euro-bond fines are far lower than previous EU cartels, they do allow the banks’ customers sue for damages if they can prove higher costs were passed on to them.

The news was not what UBS shareholders wanted to hear just weeks after the bank sheepishly revealed that it too had been hammered by Archegos, if not quite as badly as its cross-town rival; the bank said the fine could hurt second-quarter results by as much as $100 million. It’s considering an appeal and has “taken appropriate action years ago to mitigate and improve processes,” it said in a statement.

For its part, Nomura said the fine “relates to historic behavior” by two former employees “for an approximate 10-month period in 2011.” The bank “will consider all options, including an appeal” and “has introduced increased measures to ensure that we conduct our business with the highest levels of integrity,” it said in an emailed statement

Other banks were also unhappy: UniCredit “vigorously contests” the fine and will appeal to the EU courts, it said in a statement. The bank “maintains that the findings do not demonstrate any wrongdoing.”

Because since when do banks view criminal rigging of markets as a “wrongdoing.”