Banks Escape Antitrust Charges as EU Shuts Down Swaps Probe

  • Case opened in 2011 with naming of 13 bank involved in probe
  • Banks accused of colluding to keep competitors out of market

More than a dozen banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. will escape fines after European Union regulators dropped a four-year investigation into suspicions they conspired to shut exchanges out of the credit-default swaps market.

The European Commission said evidence "was not sufficiently conclusive to confirm" its concerns, according to a statement on its website Friday. It will keep investigating data provider Markit Group Ltd. and the International Swaps and Derivatives Association.

Regulators opened the case in a blaze of publicity in 2011, fighting for news attention with Prince William’s wedding to Kate Middleton the same day in London. Banks quickly found themselves also in the EU’s firing line over the rigging the London interbank offered rate, racking up huge fines and lambasted by EU officials for their "shocking" misbehavior.

"A case closure at this late stage is quite a surprise," said Al Mangan, a lawyer at Addleshaw Goddard LLP in London. "The industry has been braced for another round of high fines. The 1.7 billion euros ($1.85 billion) imposed in respect of Libor and Euribor two years ago is still fresh in its mind."

Using Leverage

The probe centered on allegations that banks abused their leverage over data provider Markit and the ISDA from 2006 to 2009 to block Deutsche Boerse AG’s Eurex and CMDX, a CDS electronic trading platform planned by the CME Group Inc. and Citadel Investment Group Inc., to maintain more lucrative over-the-counter trading.

European lenders Barclays Plc, BNP Paribas SA, Credit Suisse Group AG, HSBC Holdings Plc, Royal Bank of Scotland Group Plc. and UBS Group AG were targeted by the EU in the case. The other U.S. banks are Citigroup Inc., Morgan Stanley, Bank of America Corp. and Bear Stearns Cos., which JPMorgan acquired in 2008. The banks declined to comment on the decision.

"This is very unusual," said Marc Israel, a lawyer at Macfarlanes in London. The case against the banks may have been "more speculative because the charges against Markit and ISDA haven’t been dropped."


The EU was "struggling with the case," said Jeremie Jourdan, a lawyer at White & Case in Brussels. Closing it "shows that the commission can and does" listen to companies’ arguments and that Margrethe Vestager, who became the EU’s antitrust chief last year, doesn’t feel bound by her predecessor’s legacy to pursue probes to completion.

Once the EU sends formal objections, it often moves on to fine the companies it is targeting. Banks received formal antitrust objections in 2013 and defended themselves at a hearing last year.

"Today’s closure decision regarding the 13 investment banks is based on a thorough analysis of all information received from the parties in their replies and during the oral hearing of May 2014, as well as on documents obtained through additional fact-finding," the EU said.

While the case against the banks is being dropped, "this closure does not prejudge the outcome of the commission’s investigation regarding Markit and ISDA, which is ongoing," it said. The EU said it will also continue to monitor the practices of investment banks in financial markets, including in credit default swaps.

"ISDA believes it has acted properly at all times," the company said in an e-mail. "We will continue to cooperate with regulatory authorities to resolve this matter."

Markit said it "believes it has acted properly and will continue to cooperate fully with the European Commission," according to an e-mailed statement.

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