On Monday, Switzerland's competition commission
Wettbewerbskommission (WEKO) revealed the names of 8 big banks
amid the widespread global investigation into the alleged foreign
exchange rates manipulation. The regulator has openly confirmed
the involvement of these banks in manipulation.
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Notably, Swiss authorities became the foremost regulatory body to
initiate a formal investigation into foreign exchange rate
rigging. However, financial regulators in U.S., Europe and Asia
are still investigating the role of the banks in the manipulation
of currency rates. The foreign-exchange rates aid fund managers
to assess the apparent day-to-day value of investments.
Banks under scrutiny include Swiss-based
Credit Suisse Group AG
), Julius Baer and Zurcher Kantonalbank,
JPMorgan Chase & Co.
The Royal Bank of Scotland Group plc
). Most of these banks have refrained from issuing comments,
while some have agreed to co-operate with regulators.
However, Credit Suisse has expressed its surprise over the
allegation, as the bank was not under the purview of preliminary
scrutiny by WEKO last year. Though the bank has referred to such
accusations as incorrect and detrimental to its reputation, it is
co-operating with the regulators.
The Commission is of the opinion that these banks' traders have
fixed artificial benchmark foreign exchange rates after
consultations among themselves to make profits. Further, such
collusion among banks is believed to have affected the
significant currencies during trading.
Manipulation of currency rates by major financial institutions
triggered thorough investigations by regulatory bodies across
Europe, Asia and America. Such investigations have cost several
major global banks billions of dollars in settlements. Alongside,
we apprehend such scandals to dent the financials of these banks
over the long term.
Therefore, burdened under the pressure of such investigations,
banks have terminated a number of traders along with the closure
of electronic chat rooms - the mode of communication between
various banks. Moreover, such probes are negatively impacting the
markets as evident from the downturn in foreign exchange trading
volumes in recent months.
According to WEKO, the investigation would be extended over
months to get completed, and if found guilty, banks would be
levied with heavy penalties. These fines are expected to be
equivalent to 10% of the revenue produced by the banks from
foreign exchange trading in Switzerland over the last three
Recently, in Feb 2014, Benjamin Lawsky, superintendent of New
York's Department of Financial Services (DFS) also ordered
currency probe for foreign exchange manipulation over a number of
major banks. These banks included
Deutsche Bank AG
The Goldman Sachs Group, Inc.
Lloyds Banking Group plc
) among several others.
Regulatory authorities are investigating scandals related to the
heightening foreign exchange rate fixing and are determined to
put forward a landmark judgment to terminate such shrewd
practices in the future, bring justice to the sufferers and
punish the wrongdoers. While settlement of such issues will put
to rest a long-drawn investigation and bring reprieve to the
banks, this comes as a huge blow to their financials.