Bank secrets exposed in EU’s credit derivatives antitrust probe

BRUSSELS/LUXEMBOURG: European Union regulators inadvertently sent confidential data to 13 of the world’s biggest lenders as part of an antitrust complaint in an investigation of the credit derivatives industry. The European Commission said sensitive information was accidentally left in the documents by law firms representing companies in the probe. After the revelation was discovered, recipients, including Goldman Sachs Group and JPMorgan Chase & Co were told they must promise to destroy the information without reading it.


“The access was caused by mistakes committed by some members of IT departments of some law firms who represent companies in this investigation,” said Antoine Colombani, a spokesman for Joaquin Almunia, the EU’s antitrust chief.

“The commission declines any responsibility if document owners” use inappropriate IT software to redact sensitive information, he said. The credit-default swaps probe, which includes HSBC (HSBA) Holdings and Deutsche Bank, is one of two priority EU investigations into financial institutions. Almunia has also led the EU’s probe into the rigging of the London interbank offered rate, a scandal that’s tarnished the reputation of banks seeking to recover from the biggest financial crisis since the Great Depression.

The commission, in a July statement of objections, accused the banks, data provider Markit Group and the International Swaps & Derivatives Association of working together to prevent Deutsche Boerse and the Chicago Mercantile Exchange from entering the credit-derivatives business from 2006 to 2009.

The commission said it suspected that “the banks controlling” ISDA and Markit instructed them to prevent the two exchanges from obtaining licences for data and index benchmarks in order to keep derivatives business in the over-the-counter market.

The entry of exchanges would have reduced banks’ revenues from acting as intermediaries in the over-thecounter market, the regulator said. ISDA was a late addition to the probe, with the regulator only announcing its inclusion in March. Recipients of antitrust complaints have a right to see evidence underpinning the regulator’s case. Typically this is collated and sent in a DVD by the commission. The information malfunction came as part of this process giving recipients access to the probe file, Colombani said. He didn’t identify what data was revealed or companies involved. “A law firm used forensic IT to browse and extract information from the file and discovered that more text became visible after this process,” he said. “The law firm stopped the review immediately and informed the commission.”

Even though the quantity of documents containing sensitive business data was limited, each instance could have contained several hundred pages, according to a person familiar with the matter. The last time comparable slip-ups took place was in the late 1990s, when data in PDF documents weren’t securely deleted, said the person, who asked not to be identified because the probe is confidential. The accident in a high-profile investigation leaves plenty of blame to go around, said Andrea Renda, an academic working on competition issues at the Centre for European Policy Studies in Brussels and the Luiss Guido Carli University in Rome. “This of course reduces the trust of all players in this process, despite the fact that in some cases it’s even their fault,” he said.