Competition authorities increase scrutiny in banking industry

Our latest article “Competition authorities increase scrutiny in banking industry” by Togan Turan and Gülçin Dere is published on Lexology.

In recent years, competition authorities have not only become more vigorous in investigating anti-trust claims in financial services, but also more diligent in imposing significant fines on banks. In a recent decision, the European Commission (EC) has imposed unprecedented fines of up to EUR 1.07 billion on Barclays, the Royal Bank of Scotland (RBS), Citigroup, JPMorgan and MUFG Bank (formerly Bank of Tokyo-Mitsubishi) for getting involved in a foreign exchange spot trading cartel¹. One of the addressee of the decision, UBS, was however exempted from fines due to its cooperation with the EC under the EC’s Leniency Program².

After an extensive investigation, the EC found that competing Forex spot traders exchanged competitively sensitive information via various online professional chatrooms to coordinate their strategies on behalf of five banks³. The in-depth investigation revealed that there were two distinct cartels as part of the overall collusive behaviour in the market for Spot Foreign Exchange⁴. The first one, the so-called ‘Forex-Three Way Banana Split’ cartel involving Barclays, RBS, Citigroup and JPMorgan, lasted from December 2007 to January 2013, while the second one, known as the ‘Forex- Essex Express’ cartel, involved Barclays, RBS and MUFG Bank and extended from December 2009 to July 2012⁵.

Similarly, the Antitrust Division of the U.S. Department of Justice (DOJ) addressed the guilty pleas of five banks for colluding to manipulate the price of U.S. Dollars and Euros exchanged in the foreign currency exchange (FX) spot market in 2015⁶. The DOJ concluded that eurodollar traders at Citicorp, JPMorgan Chase & Co., Barclays PLC and RBS, the members of the cartel, communicated through an exclusive electronic chat room to influence benchmark exchange rates between December 2007 and January 2013⁷. Citicorp, JPMorgan, Barclays and RBS eventually agreed to pay fines in excess of 2.5 billion Dollars⁸.

In Turkey, on the other hand, the Turkish Competition Board (“TCB”) investigated similar claims against 14 leading banks including the RBS Istanbul Branch, Barclays Bank PLC., and Citibank A.Ş. in 2016. Interestingly, however, the TCB decided not to initiate a full-fledged investigation against these banks after an extensive preliminary investigation. As far as can be understood from the reasoned decision, the TCB found that the traders exchanged competitively sensitive information, but concluded that the information exchange was not sufficient to create anti-competitive effects in Turkey⁹.

You can reach the entire text here.