Competition law is often associated with cartel agreements between yogurt producers or price-fixing arrangements by construction companies. However, rules of fair competition also apply to banks and financial institutions—and as recent cases show, this is certainly not just a matter of legal theory. On the contrary, properly setting the competition environment is key to the functioning of the financial market, and it has real impacts not just on the banks themselves, but also on their clients, investors, and the entire economy.
When Bankers Whisper...
A case from the United Kingdom shows how easily competition law can be breached. In this case, bankers “exchanged tips” on how to set prices for government bonds. Between 2009 and 2013, traders from several major banks (Citi, Deutsche Bank, HSBC, Morgan Stanley, and Royal Bank of Canada) exchanged sensitive information regarding purchases and sales of British government bonds (so-called gilts) via private chatrooms. What was the result? In response to an investigation by the British competition authority, the banks eventually agreed to a settlement and accepted fines totalling over £100 million.
Similar cases can be found outside the United Kingdom as well. Recently, for example, the Portuguese competition authority dealt with the so-called “Portuguese banking case,” in which it imposed fines exceeding €225 million on 14 banks for the long-term exchange of information about credit conditions. The case was referred to the EU Court of Justice for a preliminary ruling. In its judgment, the Court confirmed that the sharing of sensitive information, such as interest rates in markets with high concentration and high entry barriers, is a so-called by object cartel agreement, for which it is not necessary to prove a specific effect on the market.
Why Is This a Problem?
One might ask: “Banks are already sufficiently regulated, so why apply competition law as well?” Yet, especially in banking, trust in the market and the assurance of fair conditions are essential. If banks exchange information on prices, interest rates, or business strategies, they may thereby disrupt natural economic competition. The result can be higher prices for clients, a restricted product offering, or even the risk of market destabilization.
As the British competition authority articulated: “Healthy competition drives investment, innovation, and growth. Only when competitors set prices and strategies independently can the market function properly.”
What Does This Mean for Banks (and Their Lawyers)?
- Exchange of confidential information about prices, credit conditions, or business strategies between competitors poses a serious risk to be avoided—even informal discussions in chat rooms can be considered a breach of the rules.
- Compliance programs are not just a formality—they must be continuously updated and effectively implemented so that employees are always aware of prescribed behavioural limits.
- Timely reporting of dubious conduct can pay off—for example, in the aforementioned UK case, Deutsche Bank obtained immunity as it informed the authority under the leniency program.
- Competition law is not an obstacle to business opportunities. On the contrary—it serves to protect market dynamics by preventing anti-competitive agreements that lead to artificial price or trading condition manipulations.
In Conclusion: Why It Pays to Play Fair
Banking and finance may often be perceived as a world of complex regulations and “big numbers,” but even here, one simple rule applies: Whoever plays fairly wins not just on paper, but above all in the eyes of clients and the public. And should anyone be tempted to “peek at the neighbour’s cards,” it is good to remember that the fine for such a game can be really high—and the reputational damage even greater.
Would you like to know more about how to set up compliance in banking, or do you have a specific question about competition law? We would be happy to meet with you—and we promise that all our advice will be guaranteed fair. We are also happy to share a practical guide to competition law in the field of banking and finance.
Are you interested in specific examples from the Czech environment, or do you want to know how similar cases are dealt with in practice? Get in touch!
