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FCA goes long on forex fraud

11th Feb 2014 | Banks face billions in new fines? UK Financial Conduct Authority (FCA) chief Martin Wheatley has confirmed the breadth of the current investigations into the alleged benchmark rigging by banks in answers to questions from the House of Commons Treasury Committee at a recent hearing.

Ten banks are now under investigation into forex rate manipulation with the FCA taking the lead amongst global regulators on many of the current lines of enquiry being pursued.

 

"The allegations are every bit as bad as they have been with Libor," Mr Wheatley told the Treasury Select Committee. He revealed that the FCA's probe had now widened, and "a number of other benchmarks that operate in London" were being investigated "because of concerns that are being raised with us". Mr Wheatley said "the surprise for all of us" was that the allegations about fixing forex trades and the suggestion of collusion among traders have become so strong.

 

To date various banks have been fined over $6b in regard to Libor related transgressions and as reported in PIRC Alerts xxx, investigations are still continuing involving regulators in 10 international jurisdictions.

 

BaFin, Germany’s financial regulator confirmed in December that it was looking into potential manipulation of gold and silver prices. The European Commission began a probe of potential manipulation of oil prices last year; and the FCA has been looking with the CFTC at benchmark fixings for interest rate swaps. Investigations are also taking place in Honk Kong and Australia.

 

The Australian Securities Investment Commission (ASIC) recently levelled fines against both BNP Paribas & UBS and has signalled further investigations into other market manipulation.

 

Concern is also growing over the potential impact of a new round of litigations and fines on bank profitability. Last month, Deutsche Bank announced deep quarterly losses after higher legal provisions, JP Morgan and other US banks may face further impairment while in the UK, both Barclays and the Royal Bank of Scotland are allocating additional funds for potential legal costs.

 

Mr Wheatley told the committee that it was unlikely that the FCA's foreign exchange market investigation would reach any conclusions in 2014. "I hope that we will next year... We are still in the investigation phase."

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