Exclusive: EU regulators to suspend ICE, bank CDS probe - source

BRUSSELS Wed Sep 26, 2012 7:34pm EDT

1 of 3. Tourists walk past a Bank of America banking center in Times Square in New York June 22, 2012.

Credit: Reuters/Brendan McDermid

BRUSSELS (Reuters) - EU regulators are set to suspend indefinitely an antitrust investigation into credit default swaps deals offered by clearing house ICE Clear Europe to nine banks, due to the lack of evidence, a European Commission source said on Wednesday.

The EU watchdog's decision also took into account the entry of European clearing house LCH.Clearnet into the $28 trillion credit default swaps market, the source said.

LCH.Clearnet, which is set to be acquired by the London Stock Exchange, expanded into European credit default swaps in May, which insure the buyer against a borrower's debt default based on leading European indexes.

The Commission opened an investigation in April last year, concerned that ICE Clear Europe's preferential tariff deals may have locked the banks into the ICE system and hurt competitors. ICE Clear Europe is owned by exchange operator InterContinentalExchange Inc.

The EU executive said the banks were Bank of America, Barclays Bank, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs Group, JPMorgan Chase & Co, Morgan Stanley and UBS.

ICE spokeswoman Kelly Loeffler declined comment. LCH.Clearnet was not immediately available for comment.

The Commission will keep an eye on developments in the sector, the source said.

The EU watchdog will continue a separate investigation into suspected collusion by CDS prices provider Markit and 16 banks, the source said. Companies can be fined up to 10 percent of their global revenues for breaching EU rules.

The lenders involved in the ICE case are also among the 16 banks.

Derivatives were at the heart of the collapse of U.S. bank Lehman Brothers four years ago, causing a near meltdown in global markets and prompting a raft of reforms including higher bank capital buffers.

(Additional reporting by Luke Jeffs in London and Karen Brettell in New York,; Editing by Gary Hill)