The European Union has excluded 10 of the heaviest banks in the debt market from the lucrative sale of bonds as part of its € 800 billion recovery fund, for historic breaches of antitrust rules.
Brussels the greatest independence ever begins Tuesday with the sale of a new 10-year bond to fund the NextGenerationEU program in a so-called syndication, where a group of banks is paid to meet investor demand.
But 10, including big players like JPMorgan, Citigroup, Bank of America and Barclays, have been told they can’t participate in these deals because of previous involvement in market rigging scandals, according to people familiar with the matter.
Banks found to have violated EU competition rules “will not be invited to bid for individual syndicated transactions,” said a spokesman for the European Commission, which handles debt issuance on behalf of the EU. “The Commission implements a strict approach to ensure that the entities with which it works are suitable to be an EU counterpart.”
Banks found guilty of antitrust violations will be required to show they have taken “corrective measures” to prevent them from happening again before they are allowed to file for syndication, the spokesman added.
Bank of America, Natixis, Nomura, NatWest and UniCredit were barred from participating due to an antitrust commission reigned last month that they participated in a bond trading cartel during the eurozone debt crisis a decade ago.
Citigroup, JPMorgan and Barclays – in addition to NatWest – were also banned because of a discovery two years ago that they were involved in manipulating currency markets between 2007 and 2013, people familiar with the matter said. Deutsche Bank and Crédit Agricole are also excluded due to an April decision they were involved in different bond trading cartel, said the people. All banks declined to comment.
The list includes seven of the 10 largest banks by volume of European government and supranational debt sold so far this year, according to Dealogic figures.
The 10 banks banned from syndication are among a list of 39 so-called “primary resellers” – banks that have a responsibility to bid for bonds during the regular debt auction, which the EU will launch in September. This liability can sometimes prove costly, which is why investment banks typically consider the rights they earn from syndications as a sweetener to take on the status of primary reseller.
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“There is a delicate balance in the relationship between issuers and primary resellers, and this risks shaking that up,” said a former banker of one of the financiers who has blocked the union agreements. “These problems that they highlight are from a long time ago, and they have been resolved.”
Banks working on Tuesday’s inaugural recovery fund bond are BNP Paribas, DZ Bank, HSBC, Intesa Sanpaolo, Morgan Stanley, Danske Bank and Santander. According to one of the banks, investors have placed more than 140 billion euros of orders for 20 billion euros of debt.
The recovery fund, which was approved by EU member states last year, will make Brussels one of the largest entrepreneurs in the region.