Holland’s Rabobank hit with €26.6m fine for cartel with Germany’s Deutsche Bank

A cartel fine of €26.6 million has been imposed on Holland’s Rabobank by the European Commission.

The bank was found guilty by EU antitrust regulators of a decade-long involvement in a cartel with Germany’s Deutsche Bank. It concerned the trading of certain euro-denominated bonds which was deemed to have violated the European competition rules.

Deutsche Bank has not been fined due to the fact that they exposed the cartel to the Commission. Rabobank is said to be considering an appeal against the decision made on Wednesday, November 22.

Rabobank said it was disappointed by the outcome after it had continuously cooperated with the Commission’s investigation. A provision for the fine has already reportedly been included in the financial statements of 2022.

How did the banks plan the cartel operation?

Traders of the Dutch and German banks allegedly maintained contact via e-mails and chat rooms between 2005 and 2016 in which they are said to have exchanged market-sensitive information on government bonds. They subsequently used this to align their prices and trading strategies, according to rtlnieuws.nl.

In determining the amount of the fine, the Commission looked, inter alia, at the financial advantage that the price agreements have brought to the banks, the seriousness and duration of the infringement, and its scope.

With this fine, Rabobank is still getting away relatively well considering that the fine could have amounted to 10 per cent of the annual turnover of more than €12 billion in 2022.

What did the banks do?

The price agreements made by Rabobank and Deutsche Banke concerned government bond trading on the so-called secondary market.

Government bonds are issued by government agencies through an auction, known as the primary market. Banks and investors can then trade the debt through the secondary market.

In the case of Rabobank and Deutsche Bank, they allegedly focused on SSA bonds (Supra-Sovereign, Foreign Sovereign, Sub-Sovereign/Agency bonds) and government-guaranteed bonds traded in Europe.

In two similar cases, the European Commission also issued fines in 2021. The first, of €28 million, was distributed for cartel formation in the trade of dollars-based government bonds. Deutsche Bank was also involved, but was not fined because it raised the price agreements.

The second fine, worth €371 million, was awarded to four investment banks which, together with three other banks, made prohibited price agreements.