- JPMorgan, BofA, Citi, Barclays, Deutsche Bank, BBVA, Santander Accused of Rigging Government Bond Auctions in Mexico. Bank of Mexico Implicated
by Nick Corbishley, for WOLF STREET
Collusion and “absolute monopoly practices.”
Mexico’s antitrust agency Cofece has accused the domestic subsidiaries of JP Morgan Chase, Bank of America, Citigroup, Barclays, Deutsche Bank Santander, and BBVA of colluding to rig Mexican bond prices, in particular treasury notes, over a ten-year period. Following a three-year investigation, Cofece on Monday declared that it had notified “various economic agents” of their likely involvement in a concerted scheme to manipulate Mexican bond prices .
Sergio Lopez, the head of Cofece’s investigative unit, said that the agency’s probe had unearthed evidence that between 2006 and 2016 banks conspired to withhold bond inventories from the market in order to benefit each other. In a summary on its website, Cofece described the banks’ actions as “absolute monopoly practices”. Also implicated in the scandal, according to the financial daily El Financiero, are:
- Bank of Mexico (Banxico), which conducts the primary auctions of Mexican government treasuries.
- Mexico’s former government, which did everything within its power to halt the investigation and bury the scandal.
Here’s how the scheme worked: in the weekly auctions of government securities, the seven banks, in their role as market makers, took it in turns to buy up 80% of the amount issued. The bank that bought the bonds would later divvy them up among the other members of the cartel. On the day of the auction, some of the banks would be ‘long’ treasuries while others would be ‘short’, but the price was invariably fixed. The key was to square the numbers at the end of the day and count up the gains.