13 ms·

EU charges eight banks over alleged government bond cartel

281 points by Jerry2 8y ago

Fnoord 8y ago
Which 8 banks?
- dessant 8y ago
  > 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-european-nemesis-vestager-targets-banks-in-latest-probe https://www.bloomberg.com/news/articles/2019-02-01/tech-s-eu...
  - mtgx 8y ago
    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).
    - matt4077 8y ago
      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.
      - kwhitefoot 8y ago
        They still get named in the end but they avoid some of the fine.
    - nicktelford 8y ago
      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.
      - mtgx 8y ago
        The "economy will be hurt" if bankers go to jail is getting a little old, isn't it? It's also sounds like exactly the kind of thing bankers would like the public to believe and would try to influence media narrative to repeat it.
        nicktelford 8y ago
        My point is simply that they haven't been found guilty of anything yet, just charged. If they're subsequently cleared of any wrongdoing, but their market value is tanked by the accusation, they're effectively being punished for nothing. Innocent until proven guilty and all that.
    - sgift 8y ago
      As long as they are not found guilty naming them would equal to putting up the pillory. Always a bad idea.
- short_sells_poo 8y ago
  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.
  - heyjudy 8y ago
    Checkbox-ticking folks will be glad to sell you a quasi-legal tax avoidance scheme: powered by PwC, EY, D(&T), KPMG. Recommended by MBB.
    - short_sells_poo 8y ago
      Absolutely. The bank - advisor (PwC, EY, etc...) relationship is just as riddled with conflicts of interest. It is in the interest of the advisory firm to find a "creative" solution for their clients (the banks). Otherwise the bank would go to a slightly less scrupulous institution. The theatrics apply again, the bank gets to claim to have been audited by a prestigious consultancy, the consultancy gets paid, the authorities get to shovel the problem under the carpet and the specific individuals in the authorities get a cushy consultancy job after their public service. It is not in the interest of any of these players to change anything, so it is not going to change.
- whatok 8y ago
  Bloomberg mentioned Deutsche Bank, Credit Suisse, and Credit Agricole were mentioned in a separate bond trading "cartel". Would not be surprised if they were part of the eight. http://europa.eu/rapid/press-release_IP-18-6895_en.htm http://europa.eu/rapid/press-release_IP-18-6895_en.htm
lordnacho 8y ago
As 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.
- mickeyp 8y ago
  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.
  - whatok 8y ago
    Yahoo and AIM. IB used to allow you to login to either just to keep you trapped in BBG.
  - xfitm3 8y ago
    I’m really impressed that chat rooms were used to trade information. It’s something I do in my area of technology and it makes perfect sense in hindsight. Are the groups an open secret to give legitimacy to the info, or is membership more controlled?
benj111 8y ago
To 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.
- M2Ys4U 8y ago
  >In that kind of situation do the normal rules apply? Yes.
  - tumetab1 8y ago
    Well, the rules also stated that the ECB couldn't buy government bonds and now that's the norm. Central banks, and some banks, have a political side in it which deals badly with rules. And off course, banks and political institutions are always filled with corruption so just looking at rules text doesn't say much about what is really condemned or not.
  - benj111 8y ago
    So if at the worst extent of the financial crisis it was becoming clear a bank was going to collapse. If the central bank fast tracked through a deal to get that bank sold over a weekend, you would be against that?
    - chmod775 8y ago
      I don't know how you could even get that idea. Upholding the law is significantly more important than saving some company, even if it's a large bank. If you're going to throw law and order out of the window over saving some shitty banks, then you already have a bigger problem than disagreeable numbers on balance sheets.
cinquemb 8y ago
With euro denominated bonds rates, one would question if there was much of a market in the first place that wasn't already stacked…
xiphias2 8y ago
Again as usual people were stealing lots of money (not just the banks), and they aren't even named, and they won't go to prison. These ,,charges'' are part of the cost of doing ,,business''
- bboreham 8y ago
  Traders went to prison for the Libor scandal; why would you think no-one will go to prison for this?
  - jtr_47 8y ago
    The management and executives should also go to prison, but they don't. This is where the corruption begins, but it's only the "little" guys that get thrown in jail.
  - xiphias2 8y ago
    ‘I was framed by UBS’: Tom Hayes’ letters from prison Incarcerated former trader blames himself for trusting colleagues and superiors, laments his inability to push his side of the scandal in the press during the trial https://www.fnlondon.com/articles/i-was-framed-by-ubs-tom-hayes-letters-from-prison-20180604 https://www.fnlondon.com/articles/i-was-framed-by-ubs-tom-ha...
  - joering2 8y ago
    Too big to jail. I seen Elizabeth Holmes few weeks ago in California. having breakfast with some friends at very luxury spot. Laughting and enjoying her life. No worries at all.
    - xiphias2 8y ago
      Trump was also speaking down on the stock market bubble and the inflated banking system...until he was elected.
- SubiculumCode 8y ago
  Well. A Warren administration might be less amenable to that kind of treatment of executives in the banking industry.
dylkil 8y ago
Put the fucking cunts in jail!
petarvasilev 8y ago
I bet no one would go to prison

281 points by Jerry2 8y ago

Fnoord 8y ago

Which 8 banks?

dessant 8y ago
> 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-european-nemesis-vestager-targets-banks-in-latest-probe https://www.bloomberg.com/news/articles/2019-02-01/tech-s-eu...
- mtgx 8y ago
  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).
  - matt4077 8y ago
    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.
    - kwhitefoot 8y ago
      They still get named in the end but they avoid some of the fine.
  - nicktelford 8y ago
    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.
    - mtgx 8y ago
      The "economy will be hurt" if bankers go to jail is getting a little old, isn't it? It's also sounds like exactly the kind of thing bankers would like the public to believe and would try to influence media narrative to repeat it.
      - nicktelford 8y ago
        My point is simply that they haven't been found guilty of anything yet, just charged. If they're subsequently cleared of any wrongdoing, but their market value is tanked by the accusation, they're effectively being punished for nothing. Innocent until proven guilty and all that.
  - sgift 8y ago
    As long as they are not found guilty naming them would equal to putting up the pillory. Always a bad idea.
short_sells_poo 8y ago
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.
- heyjudy 8y ago
  Checkbox-ticking folks will be glad to sell you a quasi-legal tax avoidance scheme: powered by PwC, EY, D(&T), KPMG. Recommended by MBB.
  - short_sells_poo 8y ago
    Absolutely. The bank - advisor (PwC, EY, etc...) relationship is just as riddled with conflicts of interest. It is in the interest of the advisory firm to find a "creative" solution for their clients (the banks). Otherwise the bank would go to a slightly less scrupulous institution. The theatrics apply again, the bank gets to claim to have been audited by a prestigious consultancy, the consultancy gets paid, the authorities get to shovel the problem under the carpet and the specific individuals in the authorities get a cushy consultancy job after their public service. It is not in the interest of any of these players to change anything, so it is not going to change.
whatok 8y ago
Bloomberg mentioned Deutsche Bank, Credit Suisse, and Credit Agricole were mentioned in a separate bond trading "cartel". Would not be surprised if they were part of the eight. http://europa.eu/rapid/press-release_IP-18-6895_en.htm http://europa.eu/rapid/press-release_IP-18-6895_en.htm

lordnacho 8y ago

As 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.

mickeyp 8y ago
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.
- whatok 8y ago
  Yahoo and AIM. IB used to allow you to login to either just to keep you trapped in BBG.
- xfitm3 8y ago
  I’m really impressed that chat rooms were used to trade information. It’s something I do in my area of technology and it makes perfect sense in hindsight. Are the groups an open secret to give legitimacy to the info, or is membership more controlled?

benj111 8y ago

To 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.

M2Ys4U 8y ago
>In that kind of situation do the normal rules apply? Yes.
- tumetab1 8y ago
  Well, the rules also stated that the ECB couldn't buy government bonds and now that's the norm. Central banks, and some banks, have a political side in it which deals badly with rules. And off course, banks and political institutions are always filled with corruption so just looking at rules text doesn't say much about what is really condemned or not.
- benj111 8y ago
  So if at the worst extent of the financial crisis it was becoming clear a bank was going to collapse. If the central bank fast tracked through a deal to get that bank sold over a weekend, you would be against that?
  - chmod775 8y ago
    I don't know how you could even get that idea. Upholding the law is significantly more important than saving some company, even if it's a large bank. If you're going to throw law and order out of the window over saving some shitty banks, then you already have a bigger problem than disagreeable numbers on balance sheets.

cinquemb 8y ago

With euro denominated bonds rates, one would question if there was much of a market in the first place that wasn't already stacked…

xiphias2 8y ago

Again as usual people were stealing lots of money (not just the banks), and they aren't even named, and they won't go to prison. These ,,charges'' are part of the cost of doing ,,business''

bboreham 8y ago
Traders went to prison for the Libor scandal; why would you think no-one will go to prison for this?
- jtr_47 8y ago
  The management and executives should also go to prison, but they don't. This is where the corruption begins, but it's only the "little" guys that get thrown in jail.
- xiphias2 8y ago
  ‘I was framed by UBS’: Tom Hayes’ letters from prison Incarcerated former trader blames himself for trusting colleagues and superiors, laments his inability to push his side of the scandal in the press during the trial https://www.fnlondon.com/articles/i-was-framed-by-ubs-tom-hayes-letters-from-prison-20180604 https://www.fnlondon.com/articles/i-was-framed-by-ubs-tom-ha...
- joering2 8y ago
  Too big to jail. I seen Elizabeth Holmes few weeks ago in California. having breakfast with some friends at very luxury spot. Laughting and enjoying her life. No worries at all.
  - xiphias2 8y ago
    Trump was also speaking down on the stock market bubble and the inflated banking system...until he was elected.
SubiculumCode 8y ago
Well. A Warren administration might be less amenable to that kind of treatment of executives in the banking industry.

dylkil 8y ago

Put the fucking cunts in jail!

petarvasilev 8y ago

I bet no one would go to prison