RBS Faces Enquiry For Eurozone Bond Trading Cartel Issue

The Royal Bank of Scotland (LON:RBS) (NYSE:RBS) has been identified as one of the eight banks being investigated by the European Commission for involvement in a euro bond trading cartel. The news was first reported by Bloomberg.

In January 2019, the European regulator announced a probe alleging traders of colluding to acquire and trade sovereign bonds issued by eurozone governments to mislead competition, between 2007 and 2012.

The regulator said that some traders used online chatrooms to exchange commercially sensitive information and coordinated trading strategies on the euro-denominated bonds.

Also, the Commission added that its charges did not imply that anti-competitive conduct was a general practice in the euro zone government bond sector.

While there is no legal deadline for the regulator to complete the probe, the duration depends on a number of factors, including cooperation of concerned parties. Further, the Commission can impose fines of up to 10% of a company's annual worldwide turnover.

Previously, in December 2018, antitrust regulators accused Deutsche Bank (NYSE:DB) , Credit Agricole (OTC:CRARY) and Credit Suisse (NYSE:CS) of being involved in a similar bond trading cartel for a period of about seven years (2009-2015). One more global bank was said to be under suspicion.

The banks were charged of rigging prices of U.S. dollar-denominated government bonds by exchanging “commercially sensitive information and coordinated on prices”, mainly through online chatrooms.

Our Viewpoint

Notably, RBS is on the road to recovery. Also, resumption of dividend payment and special dividend announcement reflect its improving financial position, and is expected to act as a tailwind. However, heightened competition, volatility in the global economy and litigation costs are some major concerns surrounding the company’s growth.

Shares of RBS have gained 1.2% over the past six months against 1.1% decline recorded by the industry it belongs to.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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