Busted bank cartel case leaves pieces to pick up

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MELBOURNE, Feb 11 (Reuters Breakingviews) - No one comes out of Australia’s collapsed bank cartel case looking particularly good. The Commonwealth Director of Public Prosecutions on Friday withdrew allegations read more against Citigroup (C.N), Deutsche Bank (DBKGn.DE) and four executives linked to a 2015 equity raising they managed for lender ANZ (ANZ.AX) read more . There are lessons to learn for all involved.

The lawsuit filed back in 2018 hinged on calls the bankers held with each other to discuss how to offload ANZ shares left on their books after the A$2.5 billion placement did not go to plan. JPMorgan (JPM.N), another participant, became concerned about a potential perception of collusion, so informed regulators in return for immunity. The Australian Competition and Consumer Commission then investigated for two years before passing the matter on to prosecutors.

Both agencies have fared poorly. The court twice told them to rewrite the indictments, and the case dragged on so long that the justice in charge, Michael Wigney, quipped last year that he’d like it all sorted “before we all retire”.

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It also smacks of regulatory overreach and a bit of grandstanding at a time when bashing banks was in fashion amid a far-reaching public probe of the industry. The trio of advisers will argue they were acting in the best interest of their client by trying to prevent its share price from tumbling had they dumped their respective stakes quickly and with little or no coordination.

There’s definitely a case to make, however, that the three banks were largely trying to protect their own backsides after mucking up a deal. It’s a stretch to call it cartel-like behaviour that warrants as much as 10 years in prison, but it’s unsavoury investment-banking behaviour nonetheless.

It would have been more effective and less costly to issue a stern warning and perhaps even impose steep fines, and then clarify the dos and don’ts for share sales. Underwriters, meanwhile, will have to acknowledge that their risk tolerance often lends itself to practices that are objectionable to wider society. Some bankers may be breathing a sigh of relief from the outcome, but all involved should be looking for valuable pieces to pick up from the wreckage.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)


- Australia’s Commonwealth Director of Public Prosecutions on Feb. 11 withdrew criminal cartel allegations against Citigroup, Deutsche Bank and four bank executives related to a 2015 equity raising for ANZ. Charges against the Australian bank and its former treasurer were dropped last year.

- The 2018 case followed a two-year investigation by the Australian Competition and Consumer Commission. The agency accused the banks of acting as a cartel by cooperating over how to offload unsold shares they owned.

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Editing by Jeffrey Goldfarb and Thomas Shum

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