Source: http://chimerabloom.com/calendar-of-events-on-forex/159-commission-investigation-on-forex-benchmark.html
Timestamp: 2018-10-21 01:24:27
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Commission investigation on forex benchmark » Earnings on Forex - reality or fantasy
Commission investigation on forex benchmark. Brussels, 20 May 2014. Statement on the euro interest rate derivatives case. Brussels , 20 May 2014. The Commission is sending today its statement of objections to three large international banks – Credit Agricole, HSBC and JPMorgan Chase. This is a further key step in our investigations into cartels in the financial sector. In the context of the same investigations, the Commission already imposed fines totalling EUR 1.7 billion in December 2013 on eight international financial institutions. This amount included a 10% reduction for these companies, because they had agreed to settle the case with the Commission. Back then, we found that four banks – Barclays, Deutsche Bank, Royal Bank of Scotland and Societe Generale – participated in a cartel for interest rate derivatives denominated in the euro currency. These financial products are based on the EURIBOR benchmark (for "euro interbank offered rate"). Since that time, we have continued our investigation under the standard cartel procedure for the three parties that did not settle with the Commission – namely Credit Agricole, HSBC and JPMorgan Chase. We have now reached the preliminary conclusion that these three banks may have participated in this cartel too. If confirmed, such behaviour would be a breach of the EU's antitrust rules that prohibit anticompetitive agreements. The three banks now have the opportunity to defend themselves.
We will look carefully at all their arguments before taking any final decision. Obviously, if it is confirmed that these three banks participated in the cartel, it would be a very serious infringement and the Commission would impose sanctions. Interest rate derivatives, such as swaps, futures, options or forward rate agreements, play an important role to allow financial institutions and companies to manage the risks linked to the fluctuations of interest rates. Financial markets such as these require transparency and healthy competition. These ingredients are essential to restoring trust in the financial sector, which is a precondition for a successful and sustained recovery of the European economy. Antitrust rules must be complied with in the financial sector as in all other economic sectors. Market players should compete, not collude. This is why antitrust enforcement in this area complements the efforts of financial regulators and authorities. Antitrust investigations into the financial sector are therefore a top priority for the Commission. In parallel to the case I have presented to you today, we are pursuing our investigation against a broker in the Yen Interest Rate Derivatives market.
We also continue to look into the Swiss Franc Interest Rate Derivatives market and the foreign exchange spot trading market (FOREX). And we are still looking into possible collusion relating to benchmarks for oil and biofuels. For the public: Europe Direct by phone 00 800 6 7 8 9 10 11 or by e­mail. How The Forex "Fix" May Be Rigged. The colossal size of the global foreign exchange (“forex”) market dwarfs that of any other, with an estimated daily turnover of $5.35 trillion, according to the Bank for International Settlements ’ triennial survey of 2013. Speculative trading dominates commercial transactions in the forex market, as the constant fluctuation (to use an oxymoron) of currency rates makes it an ideal venue for institutional players with deep pockets – such as large banks and hedge funds – to generate profits through speculative currency trading. While the very size of the forex market should preclude the possibility of anyone rigging or artificially fixing currency rates, a growing scandal suggests otherwise. (See also "Forex Trading: A Beginner's Guide.") The Root Of The Problem: The Currency “Fix” The closing currency “fix” refers to benchmark foreign exchange rates that are set in London at 4 p. m. daily. Known as the WMReuters benchmark rates, they are determined on the basis of actual buy and sell transactions conducted by forex traders in the interbank market during a 60-second window (30 seconds either side of 4 p. m.).The benchmark rates for 21 major currencies are based on the median level of all trades that go through in this one-minute period. The importance of the WMReuters benchmark rates lies in the fact that they are used to value trillions of dollars in investments held by pension funds and money managers globally, including more than $3.6 trillion of index funds.
Collusion between forex traders to set these rates at artificial levels means that the profits they earn through their actions ultimately comes directly out of investors’ pockets. IM collusion and “banging the close” Current allegations against the traders involved in the scandal are focused on two main areas: Collusion by sharing proprietary information on pending client orders ahead of the 4 p. m. fix. This information sharing was allegedly done through instant-message groups - with catchy names such as “The Cartel,” “The Mafia,” and “The Bandits’ Club” - that were accessible only to a few senior traders at banks who are the most active in the forex market. “Banging the close,” which refers to aggressive buying or selling of currencies in the 60-second “fix” window, using client orders stockpiled by traders in the period leading up to 4 p. m. These practices are analogous to front running and high closing in stock markets, which attract stiff penalties if a market participant is caught in the act. This is not the case in the largely unregulated forex market, especially the $2-trillion per day spot forex market. Buying and selling of currencies for immediate delivery is not considered an investment product, and therefore is not subject to the rules and regulations that govern most financial products. An example. Let’s say a trader at the London branch of a large bank receives an order at 3:45 pm from a U. S. multinational to sell 1 billion euros in exchange for dollars at the 4 pm fix. The exchange rate at 3:45 p. m. is EUR 1 = USD 1.4000. As an order of that size could well move the market and put downward pressure on the euro, the trader can “front run” this trade and use the information to his own advantage. He therefore establishes a sizeable trading position of 250 million euros, which he sells at an exchange rate of EUR 1 = USD 1.3995. Since the trader now has a short euro, long dollar position, it is in his interest to ensure that the euro moves lower, so that he can close out his short position at a cheaper price and pocket the difference.
He therefore spreads the word among other traders that he has a large client order to sell euros, the implication being that he will be attempting to force the euro lower. At 30 seconds to 4 p. m., the trader and hisher counterparts at other banks - who presumably have also stockpiled their “sell euro” client orders - unleash a wave of selling in the euro, which results in the benchmark rate being set at EUR 1 = 1.3975. The trader closes out hisher trading position by buying back euros at 1.3975, netting a cool $500,000 in the process. Not bad for a few minutes work! The U. S. multinational that had put in the initial order loses out by getting a lower price for its euros than it would have if there had been no collusion. Let’s say for the sake of argument that the “fix” - if set fairly and not artificially - would have been at a level of EUR 1 = USD1.3990. As each move of one “pip” translates to $100,000 for an order of this size, that 15-pip adverse move in the euro (i. e. 1.3975, rather than 1.3990), ended up costing the U. S. company $1.5 million. Worth the risks. Odd though it may seem, the “front running” demonstrated in this example is not illegal in forex markets. The rationale for this permissiveness is based on the size of the forex markets, to wit, that it is so large that it is nearly impossible for a trader or group of traders to move currency rates in a desired direction. But what the authorities frown upon is collusion and obvious price manipulation. If the trader does not resort to collusion, he does run some risks when initiating his 250-million short euro position, specifically the likelihood that the euro may spike in the 15 minutes left before the 4 p. m. fixing, or be fixed at a significantly higher level. The former could occur if there is a material development that pushes the euro higher (for example, a report showing dramatic improvement in the Greek economy, or better-than-expected growth in Europe); the latter would occur if traders have customer orders to buy euros that are collectively much larger than the trader’s 1-billion client order to sell euros. These risks are mitigated to a great degree by traders’ sharing information ahead of the fix, and conspiring to act in a predetermined manner to drive exchange rates in one direction or to a specific level, rather than letting normal forces of supply and demand determine these rates.
Asleep at the switch. The forex scandal, coming as it does just a couple of years after the huge Libor-fixing disgrace, has led to heightened concern that regulatory authorities have been caught asleep at the switch yet again. The Libor-fixing scandal was unearthed after some journalists detected unusual similarities in the rates supplied by banks during the 2008 financial crisis. The forex benchmark rate issue first came into the spotlight in June 2013, after Bloomberg News reported suspicious price surges around the 4 p. m. fix. Bloomberg journalists analyzed data over a two-year period and discovered that on the last trading day of the month, a sudden surge (of at least 0.2%) occurred before 4 p. m. as often as 31% of the time, followed by a quick reversal. While this phenomenon was observed for 14 currency pairs, the anomaly occurred about half the time for the most common currency pairs like the euro-dollar. Note that end-of-the-month exchange rates have added significance because they form the basis for determining month-end net asset values for funds and other financial assets. The irony of the forex scandal is that Bank of England officials were aware of concerns about exchange rate manipulation as early as 2006. Years later, in 2012, Bank of England officials reportedly told currency traders that sharing information about pending customer orders was not improper because it would help reduce market volatility. Growing repercussions. At least a dozen regulators - including the U. K.’s Financial Conduct Authority, the European Union, the U. S. Department of Justice, and the Swiss Competition Commission - are investigating these allegations of forex traders’ collusion and rate manipulation. More than 20 traders, some of whom were employed by the biggest banks involved in forex like Deutsche Bank (NYSE:DB), Citigroup (NYSE:C) and Barclays, have been suspended or fired as a result of internal inquiries.
With the Bank of England dragged into a second rate-manipulation scandal, the issue is seen as a stern test of Bank of England Governor Mark Carney’s leadership. Carney took the helm at the BOE in July 2013, after garnering worldwide acclaim for his adroit steering of the Canadian economy as Governor of the Bank of Canada from 2008 to mid-2013. The Bottom Line. The rate manipulation scandal highlights the fact that despite its size and importance, the forex market remains the least regulated and most opaque of all financial markets. Like the Libor scandal, it also calls into question the wisdom of allowing rates that influence the value of trillions of dollars of assets and investments to be set by a cozy coterie of a few individuals. Potential solutions such as Germany’s proposal that forex trading be shifted to regulated exchanges come with their own set of challenges. Although none of the traders or their employers has been accused of wrongdoing in the forex scandal to date, stiff penalties may be in store for the worst offenders. While the balance sheets of the biggest forex players in the interbank market will be able to easily absorb these fines, the damage inflicted by these scandals on investors’ confidence in fair and transparent markets may be longer lasting. Forex manipulation – US antitrust findings as evidence of infringement of European laws.
Last month, US and European financial services regulators along with US antitrust regulators fined a raft of major banks for foreign exchange rate benchmark manipulation. European antitrust regulators were conspicuous by their absence. The European Commission has made limited comments about an antitrust investigation of forex markets (see for example the end of its 4 December 2013 press release on the LIBOR fines) but, other than that, there has been little news. For UK entities who believe they have suffered from forex manipulation, a finding that the banks have infringed EU or UK antitrust laws (respectively Article 101 and Chapter 1) would be more useful than findings of infringement of financial regulations. Antitrust infringement can act as a springboard for follow-on damages actions whereas there is no equivalent right of action pursuant to breaches of the Financial Conduct Authority’s Principles for Businesses on which its fines are based. The absence of an infringement decision does not mean victims are unable to sue for breach of antitrust laws, but it does mean that, rather than a follow-on action, they have to prove the breach for themselves in a standalone claim. The factual findings in the banks’ plea agreements concluding the US Department of Justice antitrust investigation provide useful material for such a claim provided it concerns EuroUSD trading. The banks have only pleaded guilty to manipulation relating to that currency pairing. The agreements of JPMorgan, Barclays, Citicorp and RBSare identical to each other, that the banks: "entered into and engaged in a combination and conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers for, the EuroU. S. Dollar (“EURUSD”) currency pair exchanged in the foreign currency exchange spot market (“FX Spot Market”), which began at least as early as December 2007 and continued until at least January 2013, by agreeing to eliminate competition in the purchase and sale of the EURUSD currency pair in the United States and elsewhere, in violation of the Sherman Antitrust Act, 15 U. S.C. § 1." In summary, the main finding against the four banks is that their Euro-Dollar traders formed a group called “the Cartel” which used an exclusive electronic chat room and coded language to manipulate benchmark rates including the 1:15pm European Central Bank fix and WMReuters’s 4pm London fix. However, the Cartel’s manipulation of the Euro-Dollar forex market was not restricted to benchmarks. According to the DoJ statement: “these traders also used their exclusive electronic chats to manipulate the Euro-Dollar exchange rate in other ways. Members of “the Cartel” manipulated the Euro-Dollar exchange rate by agreeing to withhold bids or offers for Euros or Dollars to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators. By agreeing not to buy or sell at certain times, the traders protected each other’s trading positions by withholding supply of or demand for currency and suppressing competition in the FX market.” Further details can be found in the “factual basis for offences charged” from §4 onwards of the banks’ respective plea agreements; but they do not include quotes of chatroom discussions or examples of specific manipulations that would assist claimants. The plea agreements are nonetheless helpful because they can indicate areas in which to seek disclosure of evidence relevant to a particular alleged loss although they do not provide such evidence themselves.
As well as the four banks mentioned above, UBS was also fined, but the facts of its breaches are somewhat different, as set out in Exhibit 1 to its plea agreement. The focus is UBS’s concealment from its customers of markups on forex trading; but this was a unilateral practice, not a collusion with other banks that might violate Article 101 or Chapter 1. However, UBS do also admit that one of its forex traders conspired with other banks in the spot market by agreeing to restrain competition in the purchase and sale of Dollars and Euros. The position of UBS also differs from that of the other banks because its markup deception and collusive conduct breached its non-prosecution agreement with the DoJ resolving the LIBOR investigation. Given this breach, UBS has agreed to plead guilty to wire fraud for its LIBOR manipulation and to pay a separate penalty for that. Those contemplating a claim against UBS in relation to its manipulation of LIBOR will find a great deal of factual information in Exhibit 3 of the bank’s plea agreement, including many transcripts of LIBOR submitter and trader discussions. EU Commission fines banks $2.3 billion for benchmark rigging. BRUSSELS (Reuters) - EU antitrust regulators vowed to keep investigating rate - rigging on Wednesday as they slapped a record 1.7 billion euro ($2.3 billion) penalty on six financial institutions including Deutsche Bank, RBS and JPMorgan. The fines by the Commission, which along with authorities around the globe has been examining the manipulation of London interbank offered rate (Libor) and its euro equivalent Euribor, takes the tally of penalties related to the scandal to almost $6 billion. Confirming what a source familiar with the matter had previously told Reuters, EU Competition Commissioner Joaquin Almunia said he had been shocked at the scale of the scam and was sending a clear message that Brussels would fight and impose sanctions on cartels. Deutsche Bank, which has yet to be fined by U. S. and UK regulators as part of separate investigations into benchmark interest-rate fixing, received the highest fine of 725.4 million euros.
Germany’s largest lender and RBS were fined for their involvement in both the Euribor and Libor cartels. Also fined were JPMorgan and Citigroup, France’s Societe Generale and UK-based brokerage RP Martin. Swiss bank UBS and Britain’s Barclays avoided fines of 2.5 billion euros and 690 million respectively for revealing the existence of the cartel. U. S. and French banks were penalized for the first time in a scandal in which traders fiddled rates used as a reference point to price around $400 trillion worth of products worldwide, from derivatives to mortgages and student loans. Some banks declined to settle with the EU. France’s Credit Agricole and UK-based HSBC are disputing allegations, while the role played by UK-based brokerage ICAP remains under investigation. JPMorgan has only settled allegations relating to yen-denominated Libor, not Euribor. Almunia said the Commission would continue to investigate collusion allegations in other benchmarks, including the Swiss Franc currency and foreign exchange markets. “This will not be the end of the story, neither for interest rate derivatives nor for the manipulation of benchmarks,” Almunia told a Brussels news conference. “And one of the areas where, as you know, we have received some elements of information that we are looking at very, very carefully is forex, forex markets and the relations with forex benchmarks.” RBS Chairman Philip Hampton said the bank’s board and new management team condemned the behavior of individuals involved in rate rigging. “Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue,” Hampton said. Deutsche Bank said it had already set aside enough money to cover the costs of the fine, while JPMorgan and HSBC vowed to vigorously defend themselves over Euribor allegations.
ICAP, RP Martin and Societe Generale declined comment. Banks that have settled the EU allegations qualified for a 10 percent reduction in their fines. Authorities around the world have so far handed down a total of $3.7 billion in fines to UBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges. UBS paid a record fine of $1.5 billion late last year to U. S. and UK regulators for rate-rigging. EU fines in such instances can reach up to 10 percent of a company’s global turnover. Additional reporting by Clare Hutchison, Steve Slater and Kirstin Ridley in London, Matthias Blamont and Lionel Laurent in Paris, and Ludwig Burger in Frankfurt; Writing by Kirstin Ridley; Editing by Luke Baker and David Holmes. DOJ wants to extend stay of Forex benchmark rate fixing case against major banks. In yet another move to affect the proceedings against financial giants like HSBC, Citi and JPMorgan, the DOJ wants a five-month extension of the stay of the case. The United States Department of Justice (DOJ) has once again sought to intervene in a Forex benchmark rate fixing case targeting major banks like HSBC, Citi and JPMorgan. On June 5, 2018, the US Government sent a Letter to Judge Lorna G. Schofield of the New York Southern District Court, requesting further extension of the stay of the discovery proceedings in the case. Under the terms of the requested five-month stay, depositions and interviews of current and former employees of Citibank, JPMorgan Chase, Barclays, RBS, UBS, BNP Paribas, and HSBC, are stayed. Individuals who worked for any of the above-referenced seven banks only prior to the beginning of the class period (December 2007), however, may be deposed. For the avoidance of any doubt, this term of the proposed stay would bar, during the pendency of the stay, depositions of signatories to the May 2015 corporate plea agreements, which plaintiff counsel in the NYPL case has proposed to take.
The Department will consider one-off requests for depositions of individuals who are covered by the above stay terms. The DOJ requests to extend the stay by five months, rather than the prior extension of three months, to allow the stay to continue through the trial of United States v. Usher, et al., 17-cr-19 (RMB), which is scheduled to begin on October 1, 2018 before Judge Berman in the New York Southern District Court. Let’s recall that this case targets former Forex traders Richard Usher, Rohan Ramchandani, and Christopher Ashton, also known as the FX Cartel or FX Mafia. The start of their trial has been recently rescheduled from June 4, 2018, to October 1, 2018. While there are other indicted cases that are relevant to the Department’s assessment of a stay, the DOJ believes that following the conclusion of the Usher trial, it may be in a position to narrow the stay. The DOJ’s proposal for an extension of the stay has not been welcome. The plaintiffs in the case, captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300), have already stated they would oppose the DOJ’s request. The plaintiffs had previously indicated their intentions to take depositions from: Financial benchmarks: Commission welcomes agreement on new rules to prevent manipulation. Brussels, 25 November 2015. The European Commission welcomes last night's agreement between the European Parliament and the Council of the EU on a Regulation of financial benchmarks. The new rules were first proposed by the Commission in September 2013 in the wake of the alleged manipulation of various benchmarks which were to the clear detriment of consumers and companies throughout the EU. Following last night's preliminary political agreement, the EU is setting a leading standard globally.
A benchmark is an index or indicator used to price financial instruments and financial contracts or to measure the performance of an investment fund. Yesterday's agreement will improve the governance of such benchmarks produced and used in the EU in financial instruments such as bonds, shares, futures and swaps. The new rules are also directly relevant for consumers as benchmarks determine the level of mortgage payments of millions of households in the EU. The new rules will reduce the risk of manipulation by ensuring that benchmark providers in the EU have prior authorisation and are subject to proper supervision. Jonathan Hill, EU Commissioner responsible for Financial Stability, Financial Services and Capital Markets Union said " Benchmarks are critical for the functioning of our financial markets. Manipulating benchmarks amounts to stealing from investors and consumers and undermines confidence in markets. Today's agreement will help to rebuild confidence in financial markets in the European Union". In the financial industry, benchmarks are calculated from a representative set of data or information and determine the prices of many (highly leveraged) derivatives. Examples include: the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR) (both benchmarks for interbank interest rates); oil price assessments; and stock market indices. The proposed regulation will now be subject to a vote by the European Parliament. Background. The Commission proposed new standards for benchmarks in September 2013 in the wake of the alleged manipulation of various benchmarks including inter-bank offered rates (EURIBOR, LIBOR, etc.), benchmarks for foreign exchange (FX) and commodities including gold, silver, oil and biofuels. The regulation will implement and is in line with the principles agreed at international level by the International Organization of Securities Commissions (IOSCO) in 2012 and 2013.
The Council agreed on a negotiating mandate for that proposal in February 2015. The Regulation will contribute to the accuracy and integrity of benchmarks used in financial instruments and financial contracts by: – ensuring that benchmark administrators are subject to prior authorisation and supervision depending on the type of benchmark (e. g. commodity or interest-rate benchmarks); – improving their governance (e. g. management of conflicts of interest) and requiring greater transparency on how a benchmark is produced; – ensuring the appropriate supervision of critical benchmarks, such as EURIBORLIBOR, the failure of which might create risks for market participants and for the functioning and integrity of markets. For more information. EU Commission fines banks $2.3 billion for benchmark rigging. BRUSSELS (Reuters) - EU antitrust regulators vowed to keep investigating rate - rigging on Wednesday as they slapped a record 1.7 billion euro ($2.3 billion) penalty on six financial institutions including Deutsche Bank, RBS and JPMorgan. The fines by the Commission, which along with authorities around the globe has been examining the manipulation of London interbank offered rate (Libor) and its euro equivalent Euribor, takes the tally of penalties related to the scandal to almost $6 billion. Confirming what a source familiar with the matter had previously told Reuters, EU Competition Commissioner Joaquin Almunia said he had been shocked at the scale of the scam and was sending a clear message that Brussels would fight and impose sanctions on cartels. Deutsche Bank, which has yet to be fined by U. S. and UK regulators as part of separate investigations into benchmark interest-rate fixing, received the highest fine of 725.4 million euros. Germany’s largest lender and RBS were fined for their involvement in both the Euribor and Libor cartels. Also fined were JPMorgan and Citigroup, France’s Societe Generale and UK-based brokerage RP Martin.
Swiss bank UBS and Britain’s Barclays avoided fines of 2.5 billion euros and 690 million respectively for revealing the existence of the cartel. U. S. and French banks were penalized for the first time in a scandal in which traders fiddled rates used as a reference point to price around $400 trillion worth of products worldwide, from derivatives to mortgages and student loans. Some banks declined to settle with the EU. France’s Credit Agricole and UK-based HSBC are disputing allegations, while the role played by UK-based brokerage ICAP remains under investigation. JPMorgan has only settled allegations relating to yen-denominated Libor, not Euribor. Almunia said the Commission would continue to investigate collusion allegations in other benchmarks, including the Swiss Franc currency and foreign exchange markets. “This will not be the end of the story, neither for interest rate derivatives nor for the manipulation of benchmarks,” Almunia told a Brussels news conference. “And one of the areas where, as you know, we have received some elements of information that we are looking at very, very carefully is forex, forex markets and the relations with forex benchmarks.” RBS Chairman Philip Hampton said the bank’s board and new management team condemned the behavior of individuals involved in rate rigging. “Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue,” Hampton said. Deutsche Bank said it had already set aside enough money to cover the costs of the fine, while JPMorgan and HSBC vowed to vigorously defend themselves over Euribor allegations. ICAP, RP Martin and Societe Generale declined comment. Banks that have settled the EU allegations qualified for a 10 percent reduction in their fines. Authorities around the world have so far handed down a total of $3.7 billion in fines to UBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges. UBS paid a record fine of $1.5 billion late last year to U. S. and UK regulators for rate-rigging.
EU fines in such instances can reach up to 10 percent of a company’s global turnover. Additional reporting by Clare Hutchison, Steve Slater and Kirstin Ridley in London, Matthias Blamont and Lionel Laurent in Paris, and Ludwig Burger in Frankfurt; Writing by Kirstin Ridley; Editing by Luke Baker and David Holmes. EU Commission fines banks 1.7 billion euros for benchmark rigging. BRUSSELS (Reuters) - EU antitrust regulators vowed to keep investigating rate - rigging on Wednesday as they slapped a record 1.7 billion euro (1.4 billion pounds) penalty on six financial institutions including Deutsche Bank, RBS and JPMorgan. The fines by the Commission, which along with authorities around the globe has been examining the manipulation of London interbank offered rate (Libor) and its euro equivalent Euribor, takes the tally of penalties related to the scandal to almost $6 billion (3 billion pounds). Confirming what a source familiar with the matter had previously told Reuters, EU Competition Commissioner Joaquin Almunia said he had been shocked at the scale of the scam and was sending a clear message that Brussels would fight and impose sanctions on cartels. Deutsche Bank, which has yet to be fined by U. S. and UK regulators as part of separate investigations into benchmark interest-rate fixing, received the highest fine of 725.4 million euros. Germany’s largest lender and RBS were fined for their involvement in both the Euribor and Libor cartels. Also fined were JPMorgan and Citigroup, France’s Societe Generale and UK-based brokerage RP Martin. Swiss bank UBS and Britain’s Barclays avoided fines of 2.5 billion euros and 690 million respectively for revealing the existence of the cartel. U. S. and French banks were penalised for the first time in a scandal in which traders fiddled rates used as a reference point to price around $400 trillion worth of products worldwide, from derivatives to mortgages and student loans. Some banks declined to settle with the EU. France’s Credit Agricole and UK-based HSBC are disputing allegations, while the role played by UK-based brokerage ICAP remains under investigation. JPMorgan has only settled allegations relating to yen-denominated Libor, not Euribor. Almunia said the Commission would continue to investigate collusion allegations in other benchmarks, including the Swiss Franc currency and foreign exchange markets. “This will not be the end of the story, neither for interest rate derivatives nor for the manipulation of benchmarks,” Almunia told a Brussels news conference.
“And one of the areas where, as you know, we have received some elements of information that we are looking at very, very carefully is forex, forex markets and the relations with forex benchmarks.” RBS Chairman Philip Hampton said the bank’s board and new management team condemned the behaviour of individuals involved in rate rigging. “Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue,” Hampton said. Deutsche Bank said it had already set aside enough money to cover the costs of the fine, while JPMorgan and HSBC vowed to vigorously defend themselves over Euribor allegations. ICAP, RP Martin and Societe Generale declined comment. Banks that have settled the EU allegations qualified for a 10 percent reduction in their fines. Authorities around the world have so far handed down a total of $3.7 billion in fines to UBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges. UBS paid a record fine of $1.5 billion late last year to U. S. and UK regulators for rate-rigging. EU fines in such instances can reach up to 10 percent of a company’s global turnover. Additional reporting by Clare Hutchison, Steve Slater and Kirstin Ridley in London, Matthias Blamont and Lionel Laurent in Paris, and Ludwig Burger in Frankfurt; Writing by Kirstin Ridley; Editing by Luke Baker and David Holmes. Swiss Commission Names Eight Banks In Forex Investigation. The Swiss Competition Commission (known as WEKO) announced today, March 31st, that it was investigating eight global banks regarding possible manipulation of foreign exchange rates, and for the first time named the financial institutions.
The list of banks involved in the Swiss forex probe includes UBS AG (NYSE:UBS) and Credit Suisse Group AG (ADR) (NYSE:CS), along with Zurich Cantonal Bank, Julius Baer Gruppe AG (VTX:BAER) (OTCMKTS:JBARF) and JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C), Barclays PLC (NYSE:BCS) (LON:BARC) and Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) (LON:RBS). Today’s developments are just the latest in the ongoing international forex investigation. Regulators in other European countries, the U. S. and Singapore began investigations into possible foreign exchange manipulation several months ago, and rumors have swirled about which institutions were involved since then. This scandal threatens to become even more serious than the rigging of the “Libor” rate scandal, which was just recently settled and resulted in billions in fines against those involved. Analysts point out that since the forex probe involves the integrity of the entire foreign exchange market, rather than just a single rate, it will likely have more serious repercussions. Statement from WEKO about Forex manipulation. “There are indications that competition agreements for the manipulation of exchange rates have been made in Forex trading between banks,” WEKO elaborated in its statement. The alleged manipulation, the statement read, involved the illegal exchange of confidential information, undertaking transactions with other market participants at pre-agreed prices and other coordinated activities to “fix” a forex benchmark. “Based on the information currently available to the competition commission, authorities believe that the most important currencies are affected,” the statement continued, adding that the commission “cannot exclude” the possibility other banks or brokers may have been involved. Credit Suisse response. Credit Suisse Group AG (ADR) (NYSE:CS) released a statement saying the company was “astonished’ by the allegations, and pointed out it had not been a part of WEKO’s preliminary investigation into various banks. “The press release contains incorrect references to Credit Suisse AG and these allegations are both inappropriate and harmful to our reputation,” the Zurich-based financial behemoth said in reply the commission’s statement. The statement continued to say, however, that the company was cooperating fully with the investigation in order to clear its name as expeditiously as possible. $5.6B Forex Fines Aren't The End Of Rate-Rigging Fallout. Law360, New York (May 20, 2015, 8:16 PM EDT) -- The more than $5.6 billion in fines and guilty pleas U. S. and U. K. authorities announced Wednesday as five of the world's largest banks admitted to manipulating foreign exchange rates are massive, but there's still plenty more to the rate-fixing allegations that could yield additional fines, civil settlements and guilty pleas. While the private plaintiffs suing over forex manipulation have now racked up more than $808 million in settlements, including $394 million from Citigroup Inc. on Wednesday, that covers just four of the 12 banks named in.
European commission investigates forex benchmark
Commission press release opens investigations on forex benchmarks