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What’s worse than $6bn Libor fallout? Currency rigging, says top German regulator

Published time: January 17, 2014 11:01
Edited time: January 17, 2014 14:27
Reuters/Edgar Su

Reuters/Edgar Su

​Germany’s Bafin is the first financial regulator to comment on the Libor rate manipulation scandal which led to $6 billion in fines. President Elke Koenig said manipulating the $5.3 trillion-a-day foreign exchange market is just as bad.

Tampering with currency and precious metals markets is “particularly serious, because such reference values are based - unlike Libor and Euribor - typically on transactions in liquid markets and not on estimates by the banks,” Elke Koenig, the president of Bafin, said in a speech in Frankfurt Wednesday.

Following the Libor-rate scandal, bank practices in setting benchmark currency rates are under intense scrutiny. Salespeople are being accused of fixing special rates for customers with “big orders” over $200 million.

Germany’s biggest bank, Deutsche Bank, has already dismissed currency traders over probes involving alleged forex manipulation.

The investigation kicked off last April when the UK’s Financial Conduct Authority started looking into the forex trading practices of Deutsche Bank, Barclays, Citigroup, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Royal Bank of Scotland, Standard Chartered, and UBS. Six other regulators are helping with the worldwide investigation.

“Before Libor, people thought benchmarks could be trusted. Now there’s a presumption that there’s a risk of manipulation. Perhaps manipulation is not the exception but the rule,” Joaquin Almunia, the European Union competition commissioner said, as quoted The Financial Times.

Between 2005-2010, banks manipulated the Libor interbank lending rate by setting it low against the dollar in order to mask their financial problems and look better in the market. It is the world's most widely used benchmark for short-term interest rates in the interbank market, and is tied to over $300 trillion in loans, securities, and derivatives.

Libor manipulation has raised questions over other lending rates like the Euribor, WM/Reuters, and the Platts oil benchmark.

Lending institutions have been issued over $6 billion in fines for their manipulation of the Libor rate, which may transfer supervisory hands, possibly to France or an agency like Reuters or Bloomberg.

Barclays, UBS and Royal Bank of Scotland were fined a total of $2.6 billion for manipulating rates.

The European Commission issued record fines of 1.7 billion euro on Citigroup, Deutsche Bank, Royal Bank of Scotland, JPMorgan, Societe Generale, and RP Martin.

Other major banks- Bank of America, Bank of Tokyo, Credit Suisse, and Lloyds Banking are under investigation.

Bank of America, Bank of Tokyo Mitsubishi UFJ, Credit Suisse, Lloyds Banking Group, Rabobank, Royal Bank of Canada, Societe Generale, Norinchukin Bank and West LB have received subpoenas from the US Attorney General over the Libor rigging case.

Comments (7)

 

ZeroZeroZero 18.01.2014 13:27

Biggest problem are derivatives (this is PURE CASINO, where you bet if value of sheres will rise or fall) - their value is 40 times bigger then budgets of all world countries combined ??? Sick. And 97% of this derivates are owned by 5 banks, 2 largest are JPMorgan Chase ter Citibank.

S o if all counrties give all the money they have for 40 years, that whould be amount of money it's made on bets on stock market exchange.

 

ZeroZeroZero 18.01.2014 13:27

We think we are such advanced society on the other side, we have gambling logiv in core of worlds economy. Until we don't change this, we will just rush from one crisis to another - faster and faster, while cycles will be shorter and shorter. And rich will get richer, poor will get hungry and beaten. And Americans won't use wepons to kill their dictator but each other.

 

achingforchange 17.01.2014 14:53

I feel obliged to point out if you have money in the bank, you don't actually own it. The banks do. Thus anything goes wrong or any slight controversy, then your accounts get frozen/creditors claim "dibs" on your money, etc. Find alternatives before its too late.

View all comments (7)
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