European Commission Drops Antitrust Proceedings Against 13 Global Banking Giants

The European Commission has closed antitrust proceedings against 13 global banking giants, including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and others, over alleged collusion in the credit-derivatives market, citing a lack of sufficient evidence. The commission had charged the banks, along with International Swaps and Derivatives Association (ISDA) and Markit, a financial data provider, with preventing exchanges from entering the lucrative credit derivatives market during 2006-2009.

Key Takeaways:

• The European Commission closed antitrust proceedings against 13 global banking giants, including Bank of America, Citigroup, Goldman Sachs, and others, due to lack of evidence.
• The allegations against the banks stated that they took advantage of their position in the internal committees of ISDA and Markit to prevent Deutsche Boerse Group and CME Group Inc.'s Chicago Mercantile Exchange from entering the credit default swaps (CDS) business during 2006-2009.
• CDS is a financial instrument that permits an investor to place a bet on whether a company or country will default on its bonds within a fixed time period.
• The EU alleged that the banks were against the transition from OTC to exchange-traded CDS, as their bottom lines would have suffered, since exchange-traded CDS are less expensive.
• The banks allegedly instructed ISDA and Markit to refuse the stock exchanges licenses to use their data for creating exchange-traded CDS.
• The lack of transparency and regulatory oversight in OTC trading of CDS was exposed when Lehman Brothers Inc. collapsed in 2008.
• Regulators across the globe have continued efforts to make derivatives trading more transparent, and the banks have paid billions of dollars in fines and compensation to settle lawsuits and probes.
• The European Commission will continue to pursue its investigations against Markit and ISDA.

Statistics:

• The 13 global banking giants involved in the antitrust proceedings are: Bank of America Corp. (BAC), Citigroup Inc. (C), The Goldman Sachs Group, Inc. (GS), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Barclays PLC (BCS), The Royal Bank of Scotland Group plc (RBS), UBS Group AG (UBS), HSBC Holdings plc (HSBC), BNP Paribas SA (BNPQY), Credit Suisse Group AG (CS), Deutsche Bank AG (DB).
• The EU alleged that the banks prevented Deutsche Boerse Group and CME Group Inc.'s Chicago Mercantile Exchange from entering the CDS business during 2006-2009.
• The CDS market has been shifting from OTC to exchanges, with exchange-traded CDS being less expensive.
• The banks allegedly paid billions of dollars in fines and compensation to settle lawsuits and probes.

Sources:

• "European Commission closes antitrust proceedings against 13 investment banks over credit derivatives market allegations" by [author not specified], Global Data Point, [no date specified].
• "Regulatory efforts to improve transparency in derivatives trading" by [author not specified], Global Data Point, [no date specified].
• "Lehman Brothers collapse exposes lack of transparency in OTC trading of CDS" by [author not specified], Global Data Point, [no date specified].
• "European Commission to continue investigations against Markit and ISDA" by [author not specified], Global Data Point, [no date specified].