Currency Probes, BOE-Global Pact, ITT Probe: Compliance

Regulatory investigations of alleged currency-market collusion are probably contributing to a slump in volatility in major foreign-exchange markets, according to Steven Barrow, Standard Bank Plc’s head of Group-of-10 research.

The probes, together with limits on speculative trading in the wake of the global financial crisis, may be damping market reactions to events such as the geopolitical tension in Ukraine, London-based Barrow wrote in an e-mailed note to clients yesterday. That may boost the appeal of trading more-volatile emerging-market currencies, he said.

Currency traders are struggling to make money amid subdued price swings and trends in developed markets. The euro has never started the year in a tighter trading range versus the dollar than it did in the past two months, according to data compiled by Bloomberg.

At least a dozen regulators on three continents are investigating whether currency traders colluded with counterparts to manipulate benchmarks.

Compliance Policy

BOE Seeks Derivatives Pact to Prevent a Repeat of Lehman Cascade

The Bank of England is seeking a global pact among banks to suspend default clauses in some derivatives contracts during a crisis, in a bid to ward off bank death spirals that cascade through the financial system.

The central bank wants lenders and the International Swaps and Derivatives Association to agree to temporarily halt claims on banks that need intervention, Andrew Gracie, executive director of the BOE’s special resolution unit, said in an interview.

The Financial Stability Board has ranked banks and insurers by their potential to cause a global meltdown and demanded bigger financial cushions to avert a repeat of the 2008 credit freeze. The G20 also has created guidelines to harmonize powers available to regulators to wind down a crisis-hit bank.

“Developing such a provision that could be used by counterparties will continue to be a primary focus” of our regulatory reform efforts, ISDA said in a statement in November. The group declined to comment further.

Compliance Action

ITT Delays Filing Financial Statements Amid Student Loan Probe

ITT Educational Services Inc., an operator of for-profit colleges, said it’s unable to file its 2013 annual report because of a probe into its accounting practices.

A Securities and Exchange Commission investigation into the company’s treatment of a student-loan program will cause a delay, ITT Educational said yesterday in a regulatory filing.

The Consumer Financial Protection Bureau sued ITT Educational last month over claims it engaged in predatory lending.

Everbright Securities Gets CSRC Fine Notice for Tianfon IPO

Everbright Securities Co. was fined 4.3 million yuan and had 2.15 million yuan of assets seized by the China Securities Regulatory Commission because of inadequate due diligence related to the initial public offering of Tianfon, according to a statement to the Shanghai Stock Exchange.

Everbright is a brokerage and asset management company operating in China.

The CSRC warned two sponsor representatives and fined them 300,000 yuan each, according to the agency’s statement.


Russian Banks Uncover Dubious Operations, Official Says

Banks in Russia uncover about RU1.5 trillion ($41.5 billion) of questionable operations yearly, according to a government official.

Most of the funds are returned to Russia after going through another jurisdiction, Yury Chikhanchin, head of money laundering watchdog Rosfinmonitoring, told reporters in Moscow.

Rosfinmonitoring backs the proposal by the Finance Ministry to limit cash transactions.

Levitt Says ‘Burdensome’ Transaction Taxes Go Against the System

Arthur Levitt, a former Securities and Exchange Commission chairman and an adviser to Goldman Sachs, said transaction taxes are “burdensome.” Levitt talked with Bloomberg’s Tom Keene and Michael McKee on Bloomberg Radio’s “Bloomberg Surveillance.”

To listen, click here.

Comings and Goings

BOE Suspends Staff Member as It Probes Currency Manipulation

The Bank of England suspended a member of staff as it conducts a probe into allegations that officials condoned practices behind the currency-manipulation scandal.

While the BOE said it has found no evidence to date of collusion, it requires staff “to follow rigorous internal control processes and has today suspended a member of staff, pending investigation.” No decision has been taken on disciplinary action against any employees, it said.

Bloomberg News reported on Feb. 7 that senior currency dealers at banks told BOE officials at an April 2012 meeting that they discussed positions ahead of key benchmarks and matched buyers and sellers ahead of the fix to avoid trading then. Central bank representatives said they viewed the practices as positive to reduce market volatility and banks should formulate their own policies, according to three people with knowledge of the matter.

BOE Governor Mark Carney told the central bank’s directors late last year that he had ordered a “full examination” of internal records.

The BOE didn’t name the suspended individual.

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