EU Drops Probe Into Investment Banks Over Derivatives Trading


The European Commission on Friday abandoned an investigation into 13 international investment banks suspected of colluding to limit the activities of competitors. Evidence was “not sufficiently conclusive,” the commission said.

In 2013, the European Union’s executive began an inquiry into the trading of credit default swaps, a type of financial insurance that some believe to have exacerbated the eurozone’s sovereign debt crisis. The swaps insure against a specific economic event, such as a government defaulting.

In 2013 alone, nearly 2 million CDS contracts were active, amounting to a gross notional value of more than $13 trillion dollars at the time, according to the commission.

The investment banks under investigation were: Bank of America, Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Royal Bank of Scotland and UBS.

Those lenders or their subsidiaries were suspected of shutting their competitors out of the exchange trading market, limiting them to more expensive and risky over-the-counter trading of credit derivatives, the commission said at the time.

But on Friday, the commission dropped its investigation into the banks, on the basis of written replies from the lenders, further documentation and oral hearings conducted in 2014.

“The evidence was not sufficiently conclusive to confirm the commission’s concerns with regards to the 13 investment banks,” a statement by the commission said.

However, the commission said it would continue to investigate Markit, the leading provider of financial information on credit default swaps trading, and the International Swaps and Derivatives Association, a group of derivatives traders.

The EU has since taken steps to regulate the credit default swaps market and other types of financial instruments.