RBS Said to Pass Currency Trader Chats to FCA Amid Probe

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Royal Bank of Scotland Group Plc 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, according to two people with knowledge of the matter.

The messages related to the dealer’s trading positions, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The trader had left the Edinburgh-based bank before the investigation, and his departure was unrelated to the probe, the people said. Stewart Todd, a spokesman for the U.K.’s Financial Conduct Authority, declined to comment on the communications.

RBS, Britain’s biggest publicly owned lender, uncovered the chats after opening an internal probe following a Bloomberg News report in June that traders at some of the world’s biggest banks may have sought to manipulate benchmark rates in the $5.3 trillion-a-day foreign-exchange market. The FCA said in June it was reviewing the allegations.

European Union antitrust regulators said on Oct. 7 they were examining the possible manipulation of currency rates by the financial industry, while Switzerland’s Financial Market Supervisory Authority, Finma, and the country’s competition commission said last week they were probing similar potential wrongdoing. The U.S. Commodity Futures Trading Commission has also been reviewing potential violations of the law with regards to currency markets, said a separate person with knowledge of the matter.

Manipulation Committed

Swiss Finance Minister Eveline Widmer-Schlumpf said at a briefing in Bern today that while it’s a “fact that currency manipulations have been committed,” the extent and what institutions are affected “can’t be said conclusively at this stage.” The ministry in Bern later said she had meant to say the investigation was a fact.

The U.K. regulator sent requests for information to four banks including Frankfurt-based Deutsche Bank AG and New York-based Citigroup Inc., a person with knowledge of the matter who asked not to be identified said in June.

RBS, Deutsche Bank and Citigroup are among firms reviewing e-mails, instant messages and phone records of their foreign-exchange employees for evidence of potential manipulation, according to three people with knowledge of those probes. Spokesmen at all the firms declined to comment.

Germany’s financial regulator sees no reason for a special audit of any of the country’s banks for potential currency manipulation, Bafin spokesman Ben Fischer said today.

Trader Survey

Bloomberg News reported in June that some dealers at banks may have pooled information through instant messages and also used client orders to move key currency rates such as the WM/Reuters benchmarks, which are used to determine the value of trillions of dollars of investments. In September, Bloomberg News reported that recurring spikes in trading around the periods in which the rates are calculated suggested that dealers may have been trying to influence the benchmarks.

Authorities around the world are investigating the alleged abuse of financial benchmarks by the firms that play a central role in setting them. RBS and UBS AG, Switzerland’s largest bank, were among four firms fined about $2.6 billion for rigging the London interbank offered rate, the benchmark for more than $300 trillion of securities worldwide.

Commodities traders and analysts say benchmark prices for everything from oil to iron ore to gasoline don’t represent true market levels as often as 27 percent of the time, according to a Bloomberg News survey conducted during the past eight weeks.

Multiple Banks

Finma said last week it was “coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated” in its investigation of currency markets. Separately, the competition commission said it had opened a preliminary probe on Sept. 30 after receiving allegations of collusion among banks to manipulate some foreign-exchange rates.

Neither Swiss agency identified which banks they were looking at or the specific focus of their investigations.