Deutsche Bank AG Co-Chief Executive Anshu Jain, whose company is the world’s biggest trader of currencies, said allegations that traders rigged those markets have further eroded trust in the financial industry.
The Federal Bureau of Investigation, which was already looking into alleged manipulation of the London interbank offered rate, or Libor, is in the early stages of a probe into the $5.3 trillion-a-day currency market, a person familiar with the matter, who asked not to be identified because the inquiry is confidential, told Bloomberg News on Oct. 11.
“Issues like Libor manipulation, allegations of foreign-exchange manipulation, this is sapping at the very core of what we are trying to do,” Jain, 50, said during a panel discussion at the annual meeting of the Institute of International Finance in Washington yesterday. “What are we going to do about it? It’s long-term reform.”
Frankfurt-based Deutsche Bank, New York-based Citigroup Inc. and Edinburgh-based Royal Bank of Scotland Plc are among firms reviewing e-mails, instant messages and phone records of their foreign-exchange employees for possible evidence of manipulation, according to three people with knowledge of those probes.
The U.K.’s Financial Conduct Authority sent requests for information to four banks including Deutsche Bank and Citigroup, a person with knowledge of the matter who asked not to be identified said in June. Spokesmen at all of the firms have declined to comment.
U.K. regulators are focusing on an electronic chat room used by currency traders at financial companies, the Wall Street Journal reported on its website, citing people familiar with the matter. The investigation has found a group of traders who used names such as “The Cartel,” “The Bandits’ Club,” and “The Dream Team,” according to the Wall Street Journal.
“The fundamental contract between banks -- I would say financial services perhaps, even -- and society stands bruised, perhaps broken,” Jain said yesterday. “That broken trust is a vital asset which is missing from our balance sheets.”
Authorities in Switzerland and the European Union have also been investigating whether traders manipulated foreign-exchange prices. In the U.S., the Commodity Futures Trading Commission has been reviewing possible currency market rigging, according to a separate person with knowledge of the matter. The Office of the Comptroller of the Currency said in June it’s looking into the allegations with domestic and international regulators.
Deutsche Bank’s home regulator, the Bonn-based Bafin, said last week that it has no plans for a special probe into possible currency manipulation by banks because it has found no sign of such practices.
RBS, Britain’s biggest publicly owned lender, has handed over records of instant messages to U.K. regulators after concluding a former currency trader’s communications with counterparts at other firms may have been inappropriate, two people with knowledge of the matter said last week. The company opened an internal probe after a Bloomberg News report in June that said traders at some of the world’s biggest banks may have sought to manipulate currency benchmarks.
In the Libor probe, Deutsche Bank has fired at least seven employees over suspected misconduct. The bank, continental Europe’s largest by assets, said in February that while it would fire or suspend workers who acted inappropriately, it wouldn’t identify individuals.