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HKMA says probe found no evidence of FX rigging

Friday, December 19, 2014 - 22:26

[HONG KONG] Hong Kong's de facto central bank said it found no evidence of rigging in Hong Kong's foreign exchange benchmark following an 18-month investigation into the trading operations of 10 banks.

However, it identified "inappropriate" behaviour by individual traders at Standard Chartered and Deutsche Bank.

The Hong Kong Monetary Authority's findings follow a global investigation into the US$5-trillion-a-day FX market which resulted in six major banks paying US$4.3 billion in penalties to U.S. and European regulators last month.

The FX-rate rigging scandal has sparked global outrage and is among the largest and most extensive regulatory probes in the history of the financial markets.

But the Hong Kong Monetary Authority said on Friday it had found no evidence of collusion among the banks it investigated to fix the Treasury Markets Association FX rates or the FX benchmark fixings of other jurisdictions. "While no rigging of Hong Kong FX benchmark fixings was found in the investigation, we remind banks to be vigilant to ensure the integrity of the FX market in Hong Kong," an HKMA spokesperson said.

The HKMA began the investigation into Bank of America Merill Lynch, Barclays Bank, BNP Paribas, Citibank, Deutsche Bank, HSBC, JPMorgan Chase Bank, Royal Bank of Scotland, Standard Chartered Bank and UBS in the second half of 2013 after getting information from overseas watchdogs and the banks concerned.

The regulator identified two separate instances in which Hong Kong traders appear to have attempted to manipulate the price of currencies.

The HKMA said it had referred the cases to the relevant overseas authorities and required the banks to take "appropriate action" against the traders and review their controls.

A spokeswoman for Deutsche Bank said the firm had "fully cooperated with the HKMA's investigation and has taken action to further strengthen its control functions. The bank will continue to take appropriate remedial and disciplinary actions." A spokeswoman for Standard Chartered said the bank had already "introduced various enhanced control measures" and "will continue to work closely with its regulators to further strengthen its internal processes and oversight." The investigation into more than 40 million internal and external communications among FX traders and bank staff also revealed "indiscretions" by traders at HSBC, Citi, BofA, Deutsche Bank, JP Morgan and RBS which may have resulted in client information being disclosed to other banks.

A spokesman for HSBC said the bank "takes the conduct of its staff extremely seriously and will take whatever action is appropriate." A spokesman for Citi said the bank "acted quickly upon becoming aware of issues in our foreign exchange business and we have already made changes to our systems, controls and monitoring processes to better guard against improper behavior." A spokesman for UBS said the bank no longer conducts FX trading in Hong Kong but "continues to cooperate with ongoing FX and related investigations, globally".

A spokeswoman for BNP Paribas said the bank has fully cooperated with the HKMA and looks "to observe the highest standards of integrity in the financial markets." BofA and RBS declined to comment. Barclays and JP Morgan could not be immediately reached for comment.

REUTERS