6 foreign banks under probe over forex rigging

By Choi Kyong-ae

Korea has begun an investigation into six foreign banks’ branches here to see if they colluded to manipulate foreign exchange rates, the Fair Trade Commission (FTC) said Wednesday.

“We will investigate if they manipulated the price of U.S. dollars or euros to boost their own interests at the expense of Korean corporate clients,” an FTC official said.

As widely reported last month, six international banks were fined $5.6 billion after the U.S. and U.K. authorities found them guilty of conspiring to manipulate foreign exchange rates, the official said.

U.S. Attorney General Loretta Lynch said last month at a press conference held in Washington, “The penalty all these banks will now pay is fitting, considering the long-running and egregious nature of their anticompetitive conduct.”

The six banks are Citigroup Inc, JPMorgan Chase & Co, Bank of America Corp, Barclays Plc, UBS AG, and Royal Bank of Scotland Plc. UBS was the first bank to report the unfair practice to U.S. officials.

Citigroup, JPMorgan Chase, UBS AG declined to comment.

“The banks will be fined if we find their Korean clients suffered from any financial losses due to their misconduct,” the official said. He declined to be named and to give further details.

Korean companies and banks which bought euros and dollars from the banks or sold them to the banks may have had financial losses due to the currency manipulation, local media reported.

FX traders at the banks reportedly created invitation-only chat rooms and used coded language to coordinate their trades to seek profits from December 2007 to January 2013.

For example, if one of the banks received an order from a Korean company to buy 100 million euros at the exchange rate of 1:30 p.m. on a given day. The bank buys the 100 million euros at a cheaper price before the contracted time comes. The banks collude to make a massive buy order minutes before the contracted 1:30 p.m. pushing up the price of euros.

As a result, the Korean company unknowingly buys the euros at a price higher than the average market price. The banks reap unfair gains from their separate deals, according to local reports.

In the first quarter, the value of euros and dollars traded at domestic banks, including Korean operations of foreign banks, reached an average of $2.52 billion a day.