Ten banks turned over evidence to the U.K. Financial Conduct Authority (FCA) as part of an investigation into the manipulation of foreign-exchange benchmarks, its chief executive officer told lawmakers.
The allegations are “as bad as Libor,” FCA CEO Martin Wheatley told lawmakers in London today, referring to the global probe into rigging of the London interbank offered rate. Those investigations have resulted in global fines of about $6 billion, and authorities are now scrutinizing other benchmarks, such as currency rates.
The regulator is investigating “a number of benchmarks that operate in London,” Wheatley said. The foreign-exchange probe is unlikely to be concluded this year, Wheatley said, without identifying any banks under investigation.
The regulator said in October it was opening a formal probe into currency-rate trading, joining regulators in the U.S. and Switzerland in reviewing the $5.3 trillion-a-day market. The world’s seven biggest foreign-exchange dealers have now all taken action against their employees, with at least 17 traders suspended, put on leave or fired.
Royal Bank of Scotland Group Plc has handed over records of instant messages to the FCA after concluding that a former currency trader’s communications with counterparts at other firms may have been inappropriate, according to two people with knowledge of the matter.
Switzerland’s Financial Market Supervisory Authority and the country’s competition commission said in October they were also opening probes into foreign-exchange rates, while the U.S. Justice Department also opened a criminal investigation, a person familiar with the matter said last year. European Union regulators said on Oct. 7 they were reviewing the market.
The FCA is focusing on the WM/Reuters rates, which 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 WM/Reuters rates are used by fund managers to determine what they pay for currencies and to compute the day-to-day value of their holdings, and by index providers such as FTSE Group and MSCI Inc. that track stocks and bonds in multiple countries. While the rates aren’t followed by most investors, even small movements can affect the value of what Morningstar Inc. estimates is $3.6 trillion in funds including pension and savings accounts that track global indexes.
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.