EU charges eight banks over alleged government bond cartel
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Re: EU charges eight banks over alleged government bond cartel
#2Which 8 banks?
Re: EU charges eight banks over alleged government bond cartel
#3Which 8 banks?
> A European Commission statement Thursday didn’t identify the institutions being investigated for "a collusive scheme that aimed at distorting competition" in trading sovereign bonds issued by euro-region governments from 2007 to 2012.
https://www.bloomberg.com/news/articles/2019-02-01/tech-s-eu...
Re: EU charges eight banks over alleged government bond cartel
#4Which 8 banks?
> A European Commission statement Thursday didn’t identify the institutions being investigated for "a collusive scheme that aimed at distorting competition" in trading sovereign bonds issued by euro-region governments from 2007 to 2012. https://www.bloomberg.com/news/articles/2019-02-01/tech-s-eu...
There's no good reason why those names should be hidden from the EU population. None. It's a disgrace that governments continue to cater to large corporations and allow them to get away with small fines and "admitting no wrong" (despite receiving the fines for the crime done).
Re: EU charges eight banks over alleged government bond cartel
#5Which 8 banks?
I work in finance (although on the buy side), my gut feeling is that it's the usual suspects: big investment banks. The people manning the prop desks in these institutions get to know each other eventually as the landscape is fairly small and they all work for/with each other eventually.
This means that cliques along the lines of "I'll scratch your back if you'll scratch mine" form naturally. It's almost impossible to prevent as a lot of the trading happens directly between traders and never crosses exchange boundaries and even then, it's often tricky to prove collusion purely based on the trades. Official trading communication channels are monitored, but this is irrelevant if the deal can be pre-arranged privately off channel.
There are too many conflicts of interest in the entire industry really. It's not in the best interest of the banks to monitor their internals too closely. Sure, there are plenty of theatrics and checkbox-ticking exercises, but really, as long as it is cheaper to pay the eventual fines than to employ armies of auditors and actually give them the motivation and power to enforce the rules, it's not happening.
The internal controls themselves can be fairly annoying too. I remember a 6 month effort to get our legal department to clear a US fund launch because their incentive was to just reject every proposal. They don't directly get to see the benefits of a successful product, but would certainly feel the pain of one that gets into trouble for whatever reason.
Re: EU charges eight banks over alleged government bond cartel
#6As an ex trader, I'm not surprised. Customers on the buy side have been suspicious for years, but any one of us would not have the pieces to figure it out.
Roughly in the mid 2000s it got very common for people in the trading business to get on chatrooms. Bloomberg is probably the best known, but somehow Yahoo Chat also has a piece in the commodity space.
The chats go on constantly, and I would guess people just didn't think anyone would look through the records. Much like with squawk boxes, who would ever imagine someone listening to the recordings?
Similar cases have happened in FX and LIBOR, and it's quite clear what the incentives are. You might think that some banks are long and some short, thus cancelling out the market effect, but that's not the case. Often the trade that's popular is the same for everyone, so the banks are on one side and the customers on the other. So if you have a small group of banks that in a chatroom, it's quite tempting to collude.
You also have to think about how market making works. It's at heart an information business. If you know customers are going to be buying, you want to get inventory first and sell it to them. It's nice to be the first guy to do that but realistically you won't know what's up all the time. Makes good sense to have friends at other banks.
Re: EU charges eight banks over alleged government bond cartel
#7Earlier quoted context omitted.
> A European Commission statement Thursday didn’t identify the institutions being investigated for "a collusive scheme that aimed at distorting competition" in trading sovereign bonds issued by euro-region governments from 2007 to 2012. https://www.bloomberg.com/news/articles/2019-02-01/tech-s-eu...
There's no good reason why those names should be hidden from the EU population. None. It's a disgrace that governments continue to cater to large corporations and allow them to get away with small fines and "admitting no wrong" (despite receiving the fines for the crime done).
Here’s one, possible, good reason: the EU has a sort of “whistleblower” defense, where the first company to cooperate in a cartel investigation gets off free. Assuming that bad PR is a significant part of punishment in these cases, it would make sense to delay announcing the culprits here to give one of them time to escape being named.
Re: EU charges eight banks over alleged government bond cartel
#8As an ex trader, I'm not surprised. Customers on the buy side have been suspicious for years, but any one of us would not have the pieces to figure it out. Roughly in the mid 2000s it got very common for people in the trading business to get on chatrooms. Bloomberg is probably the best known, but somehow Yahoo Chat also has a piece in the commodity space. The chats go on constantly, and I would guess people just didn…
When I worked in commodities trading about 8-9 years ago, everyone used Yahoo Chat. However, it also popped up a message (as I recall) informing the user their conversations were being recorded for regulatory reasons.
Re: EU charges eight banks over alleged government bond cartel
#9Earlier quoted context omitted.
> A European Commission statement Thursday didn’t identify the institutions being investigated for "a collusive scheme that aimed at distorting competition" in trading sovereign bonds issued by euro-region governments from 2007 to 2012. https://www.bloomberg.com/news/articles/2019-02-01/tech-s-eu...
There's no good reason why those names should be hidden from the EU population. None. It's a disgrace that governments continue to cater to large corporations and allow them to get away with small fines and "admitting no wrong" (despite receiving the fines for the crime done).
A plausible reason is that it would likely impact their market value as shareholder confidence in those banks is affected by the potential for large fines in the near-future. Since the banks haven't actually been found guilty of anything (yet), they're simply being investigated, it would be damaging to release their names.
Re: EU charges eight banks over alleged government bond cartel
#10To play devils advocate.
Around that time you had periods where banks didn't know if their competitors were going to be around next month, there were also periods where they didn't know if several major European nations were going to be defaulting on their debts.
In that kind of situation do the normal rules apply? I don't doubt during the banking crisis several 'dodgy' deals were done between the central banks, politicians, and banks. And if it stopped the entire global economy going tits up, I'm ok with that.
Now the devil is in the details obviously, this could just be a case of personal enrichment.