New York Regulator Demands Documents from Banks in Foreign Exchange Probe
7 - February - 2014
New York banking regulator Benjamin Lawsky is seeking documents from some of the biggest banks in foreign exchange trading, including Deutsche Bank, Goldman Sachs and Barclays, according to reports, as a global probe into possible market manipulation widens.
At least seven other law enforcement offices and regulators internationally are investigating whether banks rigged the $5.3 trillion-a-day currency markets. Martin Wheatley, chief executive of Britain’s Financial Conduct Authority, said on Tuesday that his watchdog group’s probe could extend into 2015, and that the allegations it is looking into are “every bit as bad” as the Libor manipulation scandal.
More than 20 traders across Wall Street have either been put on leave, suspended or fired since the foreign exchange investigations were formally announced in October. Deutsche Bank, the biggest foreign exchange trader in the world, fired three New York-based currency traders, Reuters reported.
The probes are looking into whether senior traders at a handful of big banks colluded via online chatroom and messaging services to manipulate benchmark foreign exchange rates, or daily “fixings”.
These fixings are a cornerstone of global financial markets, used to price trillions of dollars’ worth of investments and deals and relied upon by companies, investors and central banks.
The probes are probably contributing to a decline in foreign exchange trading volumes in recent months. On the Thomson Reuters dealing platform, daily spot foreign exchange trading volumes fell 11.5pc in December to $92bn, the lowest level since the company started tracking the data almost four years ago. Some of that decline may be due to dealers’ handling more of their trading in-house.
The top five banks in foreign exchange trading account for about 50pc of total volume, and the top 10, which also include Goldman, Credit Suisse, RBS and Barclays, account for almost 80pc.
Source : http://www.telegraph.co.uk/finance/financial-crime/10620787/New-York-regulator-demands-documents-from-banks-in-foreign-exchange-probe.html
FCA Exploring Possible Libor-style Abuse in Other Markets, MPs Told
by Sean Farrell
4 - February - 2014
The Financial Conduct Authority is examining possible abuse of London-based market rates on top of its investigations into Libor and foreign exchange pricing, its chief executive has told MPs.
Appearing before the Treasury select committee, Martin Wheatley said: “These investigations are not public but there are a number of other benchmarks, London being the centre it is, that operate in London that we are investigating because of concerns raised with us.”
Wheatley declined to say which benchmarks the FCA had added to its list of investigations until it had decided whether there was a case to answer.
The regulator has fined banks heavily for rigging Libor, the London interbank offered rate that is used to price more than $300trillion (£184tn) of financial products across the world from household mortgages to business loans.
A partner at the law firm Norton Rose Fulbright, Jonathan Herbst, said: “This is a very hot topic for the FCA. Was the behaviour that took place in relation to Libor unique or was it symptomatic of something deeper going on across the benchmarks? That’s the big question.”
The FCA is also working with regulators in Europe, Asia and the US to investigate claims of rigging of foreign exchange benchmarks by banks.
Wheatley said: “The allegations are every bit as bad as they have been with Libor. Given what has come out, no, people won’t trust the way rates are fixed.”
He said the foreign exchange inquiry would take until next year to complete. “These investigations are complex. I would be surprised if we got to conclusions this year. I hope we will next year butthe nature of these investigations is that these things are very hard to predict.”
The FCA launched its formal inquiry into foreign exchange rates in October after claims suggesting traders at banks had pooled information about their positions with those at other firms to manipulate a rate used by fund managers to buy foreign currencies in the $5tn-a-day market.
Barclays, Royal Bank of Scotland and UBS are among banks in talks with the FCA about possible wrongdoing though no formal accusations have been made.
MPs questioned Wheatley and his chairman, John Griffith-Jones, about a wide range of misconduct by banks but particularly their continued abuse of customers.
Wheatley agreed with Labour MP John Mann that Britain had seen “the biggest series of quantifiable wrongdoing in the history of our financial services industry” and said he could not think of another industry that had an equivalent record.
The FCA fined Lloyds Banking Group £28m in December for putting staff under pressure to sell products customers did not want or face demotion and pay cuts.
Wheatley said the FCA was examining Lloyds’ proposed bonuses for 2013 and said there would be deductions from senior managers who encouraged staff to sell £2bn of inappropriate products. He said: “The whole concept of clawback [of bonuses] is that those involved in the decision should suffer the consequences of our subsequent enforcement action.”
The FCA will consider tougher guidelines on financial sector pay this year but is unlikely to extend Brussels’ cap on bankers’ bonuses to asset managers or insurers, Wheatley said.
The FCA bosses also revealed they had received complaints about RBS’s Global Restructuring Group (GRG) before Tomlinson’s report accused the division of deliberately driving small firms out of business for its own gain.
He said: “We had had some indications that there were problems and had some complaints previously. Some of the information would have come through whistleblowers and we would have been trying to establish the facts.”
He said the FCA was in discussions with other banks to check on the operations of their units that deal with troubled businesses operate.
The banks have told the regulator that their corporate recovery units work differently to GRG but Wheatley said the regulator had not taken this at face value and was investigating further.
Griffith-Jones said the FCA would only agree to a deadline for payment protection insurance compensation claims if it would speed up payment to consumers. Banks have so far set aside £22bn for the PPI, Britain’s biggest mis-selling scandal.
Source : http://www.theguardian.com/business/2014/feb/04/financial-conduct-authority-libor-abuse-market-rates-london
