Deutsche Bank AG (NYSE:DB) (ETR:DBK) suspended several traders for suspected attempts to manipulate benchmark foreign exchange rates.
Citing people familiar with the matter, Germany daily Die Welt reported that at least one trader who worked in New York and traded in Argentine pesos had been suspended.
Leading banks under forex probe
At least six regulatory authorities around the globe, including the US Department of Justice, the European Commission and the Hong Kong Monetary Authority, are investigating the alleged manipulation of currency markets.
Investigators are examining the possible transfer of information by traders from one bank to another through the electronic medium. Further, suspicion lingers around certain traders using information regarding large trade orders from customers to manipulate traders.
In October, Deutsche Bank AG (NYSE:DB) (ETR:DBK) revealed that it too was being investigated over its foreign exchange trading, alongside Swiss Bank UBS AG (NYSE:UBS) and Britain’s state-rescued Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS).
Lightly regulated forex market
Chad Bray of Dealbook notes Deutsche Bank AG (NYSE:DB) (ETR:DBK) is the largest trader of currencies with about 15.2% of the market. The German bank said it was cooperating with the investigations and would take disciplinary action with regards to individuals if merited.
Despite subjecting to inquiries from regulators, neither the banks nor any of the traders who have been suspended have been accused of wrongdoing. Following the investigations, several large banks, including JP Morgan Chase, Deutsche Bank have restricted the ability of traders to engage in chat rooms where traders from their banking rivals are present.
The foreign exchange market is lightly regulated and banks that dominate the marketplace control the information about how currencies are priced.
According to a person familiar with the matter, Deutsche Bank is examining the electronic communications of several employees, using search terms negotiated with regulators late last year and will suspend or reinstate based on those findings.
At least a dozen firms have been contacted by authorities and at least 12 traders have been suspended, put on leave or fired.
Deutsche Bank emails
According to sources at Deutsche Bank AG (NYSE:DB) (ETR:DBK), emails were found that led to suspicion that rates had been possibly manipulated, the German Daily Die Welt said. Moreover, there are indications there may be further cases of possible manipulation.
Benchmark foreign exchange rates, popularly called fixes, 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 banking sector has already been shaken by a rigging scandal related to the Libor, a benchmark rate for lending between banks that also determines numerous financial and interest rate contracts around the world. That scandal has already resulted in more than $3.5 billion in government settlements with financial institutions, as well as ongoing criminal prosecutions of several traders involved.