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German regulator: Rigging of monetary metals, currencies would be worse than LIBOR
Metals, Currency Rigging Worse Than Libor, Bafin Chief Says
By Karin Matussek and Oliver Suess
Thursday, January 16, 2014
Germany's top financial regulator said possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal, which has already led to fines of about $6 billion.
The allegations about the currency and precious metals markets are "particularly serious, because such reference values are based -- unlike Libor and Euribor -- typically on transactions in liquid markets and not on estimates of the banks," Elke Koenig, the president of Bafin, said in a speech in Frankfurt today.
Koenig is the first global finance regulator to comment publicly on the investigations as probes into the London interbank offered rate, or Libor, expand into other benchmarks. Joaquin Almunia, the European Union's antitrust chief, said yesterday that its preliminary probe into possible foreign-exchange manipulation covers similar practices as in the regulator's probe into Libor-rigging.
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Bonn-based Bafin said yesterday it is investigating currency trading, joining regulators in the U.K., U.S. and Switzerland, who are examining whether traders at the world's largest banks colluded to manipulate the WM/Reuters rates, used by money managers to determine the value of holdings in different currencies.
At least a dozen firms have been contacted by authorities and more than 13 traders have been suspended, fired, or put on leave in the currency case. Regulators are examining how traders, who communicated in instant-message groups, exchanged information on client orders and agreed how to trade at the time of the fix, five people with knowledge of the probes said last month.
"That the issue is causing such a public reaction is understandable," Koenig said. "The financial sector is dependent on the common trust that it is efficient and at the same time honest. The central benchmark rates seemed to be beyond any doubt, and now there is the allegation they may have been manipulated."
Bafin interviewed employees of Deutsche Bank AG as part of a probe of potential manipulation of gold and silver prices, a person with knowledge of the matter has said in December. The U.K. finance regulator, the Financial Conduct Authority, is also reviewing gold benchmarks as part of its wider investigation into how rates are set.
Firms including Barclays Plc and UBS AG have been fined for manipulating Libor and related rates. The European Union fined six firms, including Deutsche Bank and Societe Generale SA, a record 1.7 billion euros ($2.3 billion) in December for rate-rigging. Ten people have also been charged in parallel U.S. and U.K. criminal investigations into the matter.
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