The European Commission suspects Deutsche Bank AG, Credit Suisse Group AG and two other global banks of colluding to manipulate a multi-trillion-dollar government-backed bond market, escalating a long running probe.

The European Union’s executive arm, which opened the investigation almost three years ago, said in a statement Thursday that banks will now lay out their defenses. If found guilty, they could face a fine of up to 10% of their annual world-wide revenue. The commission didn’t name the banks. Deutsche Bank and Credit Suisse confirmed they were among the four. Shares of Deutsche Bank DB, +0.74% DBK, +1.00% DBK, -0.12% were down 5% and Credit Suisse CS, -0.62% CSGN, -2.15% shares were 3.1% lower Thursday.