HSBC Says It’s Being Investigated in Foreign-Exchange Rate Probe
HSBC Holdings Plc (HSBA), Europe’s largest bank by market value, is under investigation by regulators probing the potential manipulation of foreign-exchange rates.
The lender is among firms from which the U.K.’s Financial Conduct Authority and regulators around world have requested information, London-based HSBC said in a statement today. The bank, which posted a 30 percent jump in third-quarter pretax profit, is cooperating with the inquiries.
“It’s at a very early stage and the names we have been given so far don’t work for us anymore,” Chief Executive Officer Stuart Gulliver, 54, told reporters on a call. No current employees have been suspended, he added.
HSBC joins the list of at least seven banks that have said they are cooperating with authorities probing the $5.3 trillion-a-day currency market. Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) have all suspended or put on leave some of their most senior currency traders amid the investigation. No one has been accused of wrongdoing.
Four banks account for more than half of the market, according to a May survey by Euromoney Institutional Investor Plc. Deutsche Bank AG (DBK) is No. 1 with a 15 percent share, followed by Citigroup with almost 15 percent and Barclays and Switzerland’s UBS AG, which both have 10 percent. Foreign exchange accounts for about a third of revenue at HSBC’s markets operation, the largest single source.
Bloomberg News reported in June that dealers in the industry said they shared information about their positions through instant messages, executed their own trades before client orders and sought to manipulate the benchmark WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set.
The WM/Reuters rates determine what many pension funds and money managers pay for their foreign exchange and are used by index providers such as FTSE Group and MSCI Inc. to calculate daily valuations of indexes that span multiple currencies. Even small movements could affect the value of what Morningstar Inc. (MORN) estimates is $3.6 trillion in funds including pension and savings accounts that track global indexes.
The rates are published hourly for 160 currencies and half-hourly for the 21 most-traded. They are the median of all trades in a minute-long period starting 30 seconds before the beginning of each half-hour. Rates for less-widely traded currencies are based on quotes during a two-minute window.
The data are collected and distributed by World Markets Co., a unit of Boston-based State Street Corp., and Thomson Reuters Corp. Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing news and information as well as currency-trading systems.
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