Syndicates of banks offering loans to borrowers may be subject to scrutiny by Directorate General (DG) Competition, the antitrust authority of the European Commission (the Commission), because the Commission apparently suspects that the cartel prohibition has been breached by banks.
In the Management Plan from DG Competition for 2017 (link) it is stated that ‘DG Competition will possibly engage in a study on potential competition issues of loan syndication’. It is unclear from the Management Plan which anticompetitive conduct DG Competition may focus on, but the Commission states that syndicates of banks offering loans to borrowers exhibit ‘close cooperation between market participants in opaque or in-transparant settings’.
In a syndicated loan banks work together to provide individual portions of a large loan to a borrower. Banks mostly form syndicates to spread risks between the participating banks of the syndicate. Usually, the banks work together to negotiate the terms for their individual portions of the loan.
According to the Management Plan, the Commission will focus on obtaining information on market structure, dynamics between market participants and potential competition issues. This indicates that the Commission considers to carry out a sector inquiry or an own investigation based on public information. The Commission carries out sector inquiries when it believes that a market is not working properly due to breaches of competition rules.
In general the exchange of commercial sensitive information between banks is under close scrutiny by EU antitrust authorities. On 7 December 2016 the Commission fined several banks for the exchange of confidential and sensitive information about their EURIBOR positions and strategies through corporate chat-rooms or instant messaging services (link).
Competition authorities (as the Commission) could impose high fines if they establish that competition rules have been infringed. It is essential that banks have a compliance program to prevent such breaches.