New York Regulator Demands Documents From More Than A Dozen Banks including Barclays, Deutsche, Goldman Sachs And RBS As Forex Probe Widens

New York regulator demands bank documents as investigation widens (Guardian, Feb 5, 2014):

Goldman Sachs and Barclays among banks investigated after reports some traders shared information about currency positions

New York state’s top financial regulator has demanded documents from more than a dozen banks including Barclays, Deutsche, Goldman Sachs and RBS as a probe widened into trading practices in the $5.3tn-a-day global foreign exchange markets.

Benjamin Lawsky, New York’s financial services superintendent, made the move following the banks’ decision to fire or suspend at least 20 traders following reports that employees at some firms had shared information about their currency positions with counterparts at other companies.

A source in Lawsky’s office said the investigation, which also brought in Credit Suisse and Standard Chartered, was at an early stage. “We are investigating a broad range of concerns about foreign exchange trading at these institutions,” said the source, who asked not to be identified.

Lawsky’s move marks the latest escalation in a global investigation by regulators into the manipulation of benchmark rates. The currency probe comes as regulators are still investigating the manipulation of the Libor lending rate by traders at some of the world’s biggest banks.

Reuters revealed on Tuesday that Deutsche Bank had fired three New York-based currency traders amid signs of a widening investigation. “Deutsche Bank has received requests for information from regulatory authorities that are investigating trading in the foreign exchange market,” a bank spokeswoman said in an emailed statement. “The bank is co-operating with those investigations, and will take disciplinary action with regards to individuals if merited.”

On Wednesday the Wall Street Journal reported that Goldman Sachs’ Steven Cho, formerly global head of spot and forward foreign exchange trading for major currencies, was retiring from the bank. His departure came a day after Citigroup announced that Anil Prasad, its global head of foreign exchange, was leaving the company. It is not know if his retirement is in any way linked to any investigation.

Citigroup, JP Morgan and others have confirmed they are co-operating with investigations.

A Citi source told Reuters that the departure of Prasad, who was based in London, was unrelated to any ongoing currency market investigation.

Prasad’s exit comes a month after Rohan Ramchandani, formerly Citi’s head of European spot foreign exchange trading, was fired. Ramchandani had been a member of the Bank of England’s foreign exchange joint standing committee, a forum for discussing market issues. The reasons for his dismissal were unknown.

Lawsky is one of the world’s most powerful regulators and has authority over financial institutions chartered in New York state, including many non-US banks that do business in the country.

Appointed in 2011, Lawsky rose to prominence after accusing Standard Chartered of orchestrating an illegal money-laundering operation, and threatening to revoke its New York banking licence. News of the investigation triggered a 23% drop in Standard Chartered’s share price and ended with the bank paying a $340m fine to the New York State Department of Financial Services.

Lawsky’s probe into the FX markets is not the only one under way. The UK’s Financial Conduct Authority (FCA) and the US Department of Justice are also conducting investigations. Swiss regulators are also looking at the markets, and are thought to be focusing on the “fix” – a figure used to price a number of financial products such as funds for private investors.

FCA chief Martin Wheatley said this week that he was examining possible abuse of London-based market rates. Wheatley and others continue to examine the Libor interest rate scandal that has led to billions of dollars in fines for banks including Barclays and UBS. “The allegations are every bit as bad as they have been with Libor. Given what has come out, no, people won’t trust the way rates are fixed,” Wheatley told a Treasury select committee this week.

Lloyds Banking Group is believed to have been contacted. RBS declined to comment, as did Deutsche Bank. Standard Chartered could not immediately be reached. Goldman Sachs declined to comment.

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