Photographer: Simon Dawson/Bloomberg

FX Probe Said to Emerge From Shadows as EU Seeks Bank Data

  • Info would help EU to calculate any fines, people familiar say
  • Move may pave way for settlement talks or antitrust complaint

The European Union is stepping up its currency-rigging probe more than a year after U.S. and U.K. regulators issued multi-billion dollar fines to global banks, people familiar with the investigation said.

The European Commission has asked banks to gather sales data that could be used to calculate eventual penalties, said two people who asked not to be named as the case’s status is confidential. The move signals that regulators may be gearing up to either open settlement talks or issue a statement of objections in the next few months, the people said.

The EU wants answers before its summer break at the end of next month, but this time frame may slip, one of the people said.

“There is a buzz right now around this investigation,” said Ioannis Kokkoris, a professor in law and economics at Queen Mary University of London who expects the EU taking action “in the near future.”

While the EU has lagged behind, authorities in the U.S., the U.K. and Switzerland issued about $10 billion in penalties to a group of banks including Citigroup Inc., JPMorgan Chase & Co. and Barclays Plc for what U.S. Attorney General Loretta Lynch called a “brazen display of collusion” to game markets.

Even though the commission is used to being late to the party, its fines can sting. EU antitrust regulators issued their first penalties initially worth a total of 1.7 billion euros ($1.9 billion) in Libor and Euribor cases as part of a multi-bank settlement a year and a half after Barclays was fined by U.K. and U.S. watchdogs.

The EU’s “investigation has been quite slow compared to other jurisdictions but the amounts of the penalties at stake are huge,” said Pierre-Henri Conac, a professor in banking and financial law at the University of Luxembourg. “This might explain that the commission is proceeding carefully.”

The EU could now be in a position to complete the currency case in a year if a settlement can be reached with a group of banks, said one of the people. Settlements allow the EU to levy lower penalties in exchange for cooperation and an acceptance of wrongdoing.

Regulators may need several more years to finalize the antitrust investigation if they don’t manage to secure a multi-bank settlement.

Lenders either declined to comment or didn’t immediately respond.

“This investigation is ongoing and we cannot prejudge its outcome or timing of a decision at this stage,” said Ricardo Cardoso, a spokesman for the commission in Brussels.

Transcript Evidence

The EU has been flooded with transcripts of currency traders’ chat-room conversations as a number of banks scramble to earn good behavior points with regulators, one of the people said. But while instances of exchanges of trading information are numerous, the commission is keen to focus on the most egregious conduct where multiple traders colluded to align positions and push transactions through at the same time, another person said.

Cartel fines are normally based on revenues but the EU regulator needs to be careful with rate-rigging cases. The commission was forced to cut Societe Generale SA’s fine for Euribor manipulation after the bank made a 218 million-euro “mistake” in its calculations.

The commission will want to make sure such problems don’t happen again in the FX case, according to Kokkoris.

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