On 13 February 2018, the Spanish Markets and Competition Commission (“CNMC”) fined four major Spanish banks €91 million for colluding to fix the price of interest-rate derivatives (“IRDs”) attached to syndicated loans above market price.  The decision is an additional indication that syndicated loans are increasingly coming under the scrutiny of competition authorities, after the European Commission last year commissioned a study on competition issues in this market that will be completed by the end of the year 2018.


The Spanish Competition Authority (CNMC) launched its investigation following a complaint of VAPAT, a company that builds and operates wind farms.  VAPAT alleged that Banco Santander, Banco Bilbao Vizcaya Argentaria, Caixabank and Banco Sabadell colluded to fix the price of IRDs attached to syndicated loans contracted with these banks to finance wind farm projects.

IRDs are financial derivatives mostly used in order to hedge investors against interest rate fluctuations.  Syndicated lenders can usually require borrowers to take these derivatives with project finance loans, as these loans bear very high risks.  IRDs can take the form of a collar or a swap.  Collars allow to limit the range within which the interest rate can vary by setting a minimum rate (the floor) and a maximum rate (the cap) beyond which the interest rate paid by the borrower cannot go.  Swaps allow to transform a variable interest rate into a fixed interest rate.  In the case under investigation the collars and swaps offered by the four banks were “zero-cost”, meaning that the premiums that should have been paid by the borrower and the banks in exchange for these instruments cleared each other and no premiums had to be paid.

Decision of the CNMC

While the CNMC did not question the rational for banks to coordinate together to offer syndicated loans nor to offer a common price for the IRDs covering these loans, it investigated two types of anti-competitive practices conducted by the four banks concerned between 2006 and 2016:

  • Colluding to set to the price of IRDs above market price

The CNMC considered that the four banks concerned entered into an anti-competitive agreement by agreeing to set the price of IRDs above market price, with hidden margins, while allegedly misleading borrowers into believing that they were purchasing IRDs at market price with no cost.  The IRD contracts reviewed by the CNMC did not mention any set up margin for the bank and even excluded it in most instances.  In addition, each of the banks offered the IRD individually to the borrower, i.e. there was the theoretical possibility for the borrower to have different IRD prices.  According to the CNMC, this gave the borrower the impression that he was purchasing IRDs at market price under a construct without any additional set up margins.  According to the CNMC, under these conditions, coordination between the banks could only have been justified in order to offer to the client the best possible conditions.  Relying on the judgment of the Court of Justice in Hoffman Laroche, the CNMC considered that providing deceptive information and colluding to set the price of IRDs above market price – thus taking a hidden margin – constituted a restriction of competition by object.  The CNMC also assessed the impact of this practice on four projects of VAPAT and concluded that it had led to an additional cost of several millions euros.   Furthermore, the CNMC considered that the practice concerned could not be considered as an ancillary restriction to project financing nor justified under Article 101§3 of the Treaty on the Functioning of the European Union.

  • Bundling of IRDs and syndicated loans

The CNMC considered, however, that the four banks did not enter into anti-competitive bundling by requiring that the borrower take the IRDs together with the syndicated loan.  The CNMC acknowledged that given the complexity of the operations linked to syndicated loans, it may be justified for the syndicated borrowers to also provide the IRDs covering the loan.


The CNMC’s decision may have an important impact on the way banks participating in a loan syndicate set and negotiate the price of the accompanying derivatives like the IRDs.  While the decision does not question the bundling of IRDs with syndicated loans nor the setting of a common price, it prohibits banks from jointly fixing the price of IRDs above market price if they lead the borrower to believe that he was purchasing these derivatives at market price without any additional cost.

One may wonder whether it is the role of a competition authority to intervene in this area. Indeed, the issue at hand is not that banks of the syndicate did not compete together, the authority accepted that price fixing may be justified and that bundling IRDs with syndicated loans may be justified as well.   The issue is that the banks allegedly “deceived” borrowers.  In other words, the CNMC did not seek to protect competition but to protect project finance borrowers by ensuring increased transparency on the margins applied on IRDs and that the borrowers get the best possible conditions from the banks.  Sector regulators and financial supervisory authorities may be better placed to achieve this goal.  One may also wonder how much transparency can be required from banks in setting the price of IRDs, as these financial derivatives are notoriously complex, over-the-counter instruments, with no regulated market and sold only to sophisticated borrowers.

That being said, banks should be aware that competition authorities are actively scrutinizing syndicated loan markets and that any actions to exploit asymmetry of information to the borrower may be considered as an infringement of competition law.


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Photo of Johan Ysewyn Johan Ysewyn

Johan Ysewyn is widely respected as a highly skilled European competition lawyer, advising on complex competition issues, including on merger control, anti-cartel enforcement, monopolisation cases and other conduct investigations. He acts as Co-Head of the firm’s Global Competition group and as Managing Partner…

Johan Ysewyn is widely respected as a highly skilled European competition lawyer, advising on complex competition issues, including on merger control, anti-cartel enforcement, monopolisation cases and other conduct investigations. He acts as Co-Head of the firm’s Global Competition group and as Managing Partner of the Brussels office.

Clients turn to Johan when they need cutting-edge competition and regulatory advice. He has been advising some of the world’s leading companies for over 30 years on their most complex competition issues. Johan is “an exceptional lawyer who is solution-oriented, has a remarkable ability to rapidly understand our business and has excellent reactivity.” (Chambers Global) Johan “attracts considerable praise for his reliable practice, as well as his great energy and insight into cartel proceedings.” (Who’s Who Legal)

Johan represents clients from around the world in dealings with competition authorities as well as in court litigation. He has in-depth knowledge of regulatory procedures and best practices as well as longstanding relationships with key regulators, in particular at the European Commission. He has also an active advisory practice covering a range of areas of interest to corporates, including the interplay between ESG goals and competition law, the impact of competition law enforcement on digital markets and broad strategic compliance issues.

Johan’s experience spans many industry sectors, with recent experience in telecoms and information technology, media, healthcare, consumer goods, retail, energy and transport. He has advised on several of the most major merger investigations in recent years. In addition, he has represented clients in many conduct investigations.

Johan’s practice also has a strong focus on global and European cartel investigations. He has acted for the immunity applicants in the bitumen and marine hose cartels, and acted for defendants in alleged cartels in financial services, consumer goods, pharmaceuticals, chemicals, consumer electronics and price benchmarking in the oil sector. He has acted for the European Payments Council in the first European Commission investigation into standardisation agreements in the e-payments sector. Johan has written and lectured extensively on international cartel and leniency-related issues. He co-authors the loose-leaf European Cartel Digest and lectures on cartel law and economics at the Brussels School of Competition.

Johan is also one of the leading experts on EU State aid issues, working both for beneficiaries and governments. He has advised a number of leading banks and governments, as well as represented major European airlines. From the cases that can be publicly disclosed, he has been involved in the Fortis, KBC, Dexia, Arco, Citadele, airBaltic and Riga Airport State aid cases.