For 10 of the world’s biggest banks, past transgressions in the EU look set to cost them millions of US dollars in fees.
Companies including JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp and Barclays PLC have been frozen out of syndicating bond sales for the European Commission’s 800 billion euros (US$970 billion) NextGenerationEU program, which is expected to issue 80 billion euros of debt this year.
The banks have been temporarily barred from the lucrative trades as the bloc assesses whether they have done enough to fix previous breaches of antitrust rules.
The move has the potential to reshape debt league tables for the region, hand hefty fees to smaller competitors and even weigh on bankers’ bonuses.
The 20-billion-euro issuance on Tuesday by the bloc — the largest amount the EU has raised in a single transaction — might have generated more than US$20 million in fees, estimates by Bloomberg showed.
The banks affected are a Who’s Who of global banking, with Deutsche Bank AG, Nomura Holdings Inc, UniCredit SpA, NatWest Group PLC, Natixis SA and Credit Agricole SA also barred.
“These banks have to demonstrate and to prove that they have taken all the necessary remedial actions which have been demanded by the commission when deciding about these cases,” European Commissioner for Budget and Administration Johannes Hahn told reporters on Tuesday. “We now expect the submission of the necessary information, and then of course we have to analyze and assess it. I cannot predict how long it takes.”
While the exclusion is unlikely to make or break the trading year for most desks, the scale of the missed fees could snowball. Another two syndications are due before the end of next month.
The EU’s big-ticket transactions account for a large part of banks’ business in the European market for new bond issues this year. The amount of EU bonds that dealer banks have sold this year typically amounts to more than 10 percent of their transactions in other European bonds, based on data compiled by Bloomberg.
The 10 banks barred from the syndications are among a list of 39 so-called “primary dealers,” which have a responsibility to bid for bonds during regular debt auctions. The EU is expected to begin those in September.
Stopping banks from taking part in bond sales is rare, and a first for the EU since it started selling debt in meaningful sizes under its social program last year.
In April, Bank of America was among banks fined about 28.5 million euros by EU regulators for colluding in chatrooms on trading of US supra-sovereign, sovereign and agency bonds. In addition, last month, Nomura and UniCredit were among those fined for colluding on euro government bond trading during the region’s sovereign debt crisis.
The missing banks did not seem to dent demand on Tuesday, with about 142 billion euros of investor orders for the offering. The lead managers for Tuesday’s sale were BNP Paribas SA, DZ Bank AG, HSBC Holdings PLC, IMI-Intesa Sanpaolo SpA and Morgan Stanley, with Danske Bank A/S and Banco Santander SA hired as coleads.
Despite its hardline stance, the EU offered some hope of a swift resolution to the banks it has excluded — assuming they satisfy its requirements.
It is in the EU’s “interest to include all the key players and banks which have qualified themselves for the primary dealer network,” Hahn said. “But of course the legal aspects have to be respected.”
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