Court Rules on European Government Bonds Cartel, Reduces Some Bank Fines

Key Takeaways

• Court Confirms Commission’s Decision: The General Court largely upheld the European Commission’s findings that the banks were involved in a cartel manipulating European Government Bonds.
• Fines Reduced for Nomura and UniCredit: The court reduced the fines for Nomura (from €129.6 million to €125.6 million) and UniCredit (from €69.4 million to €65 million).
• Banks’ Liability: The court reaffirmed that banks are accountable for the actions of their traders, even if the conduct was carried out behind closed doors in chat rooms.
• Appeal Window: The banks can appeal the decision to the Court of Justice of the EU, but only on legal points. They have two months and ten days to decide if they’ll take this route.

Deep Dive

The General Court of the European Union has handed down a ruling on the high-profile cartel case in the European Government Bonds (EGBs) market, and while it’s largely business as usual for most of the banks involved, there’s a bit of a twist. While the court mostly upheld the European Commission’s 2021 decision, it did make some adjustments, particularly when it comes to the fines imposed on UniCredit and Nomura.

In 2021, the European Commission slapped a total of €371 million in fines on seven banks, including big names like UBS, Nomura, and UniCredit, for their roles in an extensive and illicit cartel that operated between 2007 and 2011. The banks’ traders were caught exchanging sensitive information about prices and market conditions, effectively manipulating the European government bonds market to gain an unfair advantage in bond issuance, trading, and placement across the European Economic Area (EEA).

But the Commission didn’t fine all the banks. Bank of America, Natixis, and NatWest were let off the hook. For Bank of America and Natixis, the penalty was time-barred, meaning the Commission couldn't impose a fine because too much time had passed. As for NatWest? Well, they blew the whistle on the whole operation, so they avoided a fine as well.

Six of the seven banks fought back, challenging the Commission’s decision. Fast forward to today, and the General Court has weighed in. The court has confirmed the Commission’s findings, but it did decide to trim down the penalties for Nomura and UniCredit. Nomura’s fine was reduced from €129.6 million to €125.6 million, while UniCredit’s penalty dropped from €69.4 million to €65 million.

So, why the adjustments? The court found that the Commission had made some errors in how it calculated the fines, especially in how it handled Nomura’s data and the start date for UniCredit’s anti-competitive behavior, which, according to the court, started 17 days later than originally believed.

But let's not gloss over the big picture here that the court upheld the core of the Commission’s decision, confirming that the banks’ actions amounted to one single, continuous infringement. They had colluded by exchanging price-sensitive information and manipulating market conditions through chat rooms on platforms like Bloomberg terminals. This was not just a minor slip-up – it was a serious blow to market competition.

The General Court also made it crystal clear that banks are fully responsible for the actions of their traders. If one of your employees is involved in anticompetitive behavior, your bank is liable and noncompliant. Simple as that.

While the judgment is significant, it doesn’t quite close the case. The banks now have a window to appeal to the Court of Justice of the European Union, but only on points of law. The clock is ticking – they have two months and ten days to decide whether to take that route.

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