JPMorgan Chase & Co., Deutsche Bank AG and HSBC Holdings Plc are among at least seven firms facing a Canadian probe into whether they participated in a conspiracy to manipulate prices on interest-rate derivatives.
The nation’s Competition Bureau is investigating conduct by the group -- also including Citigroup Inc., Royal Bank of Scotland Group Plc, ICAP Plc and RP Martin Holdings Ltd. -- between 2007 and 2010, according to documents it filed with the Ontario Superior Court in May. Investigators are examining whether firms conspired to affect prices on derivatives linked to the Yen London interbank offered rate, according to the documents, which were shown to Bloomberg News by court clerks.
Alexa Keating, a spokeswoman for the Competition Bureau, said in an e-mailed statement that “there is no conclusion of wrongdoing at this time and no charges have been laid.”
Canadian officials opened the case after a “cooperating party” told the bureau that banks, at times facilitated by cash brokers, agreed to make artificially high or low submissions for the benchmark rate known as Yen Libor, according to the documents, which described the informant as a bank involved with the matter.
Regulators in the U.S., Europe and Asia are investigating whether financial firms tried to manipulate benchmark interest rates set by a survey of banks. The rates were used by investors to gauge firms’ ability to borrow money at the height of 2008’s credit crisis and can play a key role in prices on derivatives.
Libor rates are generated through a daily survey of firms conducted on behalf of the British Bankers’ Association in London. The lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs.
Spokesmen for New York-based JPMorgan and Citigroup, Frankfurt-based Deutsche Bank, Edinburgh-based RBS and London-based ICAP said they couldn’t immediately comment.
Diane Soucy Bergan, a spokeswoman for London-based HSBC in Chicago, didn’t immediately respond to requests for comment. A call after normal business hours to a U.K. phone number listed on RP Martin’s website for media inquiries wasn’t answered, nor was a call to a number listed for the broker’s New York office.
The bureau described the claims in an application for court orders compelling the companies to provide records, such as e-mails. The firms may have influenced derivatives trading “on a worldwide basis, including in Canada,” it said. The court granted the orders.
An ICAP broker allegedly told a derivatives trader that he would try to get London-based brokers to influence banks participating in setting Yen Libor, according to the bureau. A trader at HSBC also allegedly communicated with cash brokers, instructing them to influence the benchmark rate, the bureau said. Not all attempts to manipulate the rate were successful, according to an affidavit filed by the bureau.
The Canadian officials said they were seeking lists of individuals responsible for making Yen Libor submissions, internal communications and records describing so-called Chinese walls separating workers within the banks.
They sought a list of interest-rate derivative trades, including records showing whether the banks made a profit or loss on them. They also requested records showing the process banks used to price interest-rate derivatives and how traders were compensated.
The cooperating party told the bureau that by manipulating the rate, the participant banks affected all interest-rate derivatives that use Yen Libor as a basis for their price, according to the court filing.