Investigation Started On Gold & Silver Manipulation Against 10 Major Banks
25 February 2015, 15:11
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This is an excerpt from the Wall Street Journal:
U.S. officials are investigating at least 10 major banks for possible rigging of precious-metals markets, even though European regulators dropped a similar probe after finding no evidence of wrongdoing, according to people close to the inquiries.
Prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday.
Also under scrutiny are Bank of Nova Scotia , Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Société Générale SA, Standard Bank Group Ltd. and UBS AG , according to one of the people close to the investigation.
The precious-metals probes are the latest example of regulatory scrutiny into how the world’s biggest financial institutions influence widely used benchmarks. Until last year, prices for gold, silver, platinum and palladium were set using a decades-old practice of once- or twice-a-day conference calls between a small group of banks. The process for setting each of the price “fixes” has since been overhauled.
Benchmarks for the four precious metals affect jewelry prices and financial products such as exchange-traded funds. U.S. commercial banks regulated by the Office of the Comptroller of the Currency had $115.1 billion of precious metals-related contracts outstanding as of Sept. 30.
In the interest-rate investigations, banks often reached settlements with U.S. and U.K. regulators, which made similar allegations of collusion in the rate-setting process. In contrast, the U.K. Financial Conduct Authority and German financial watchdog BaFin reviewed the precious-metals benchmarks but closed their inquiries without finding evidence of wrongdoing, according to people familiar with those probes.
Robert Hockett, a law professor at Cornell University, said it is “not particularly surprising” that the Justice Department is plowing ahead despite the decision by European regulators. Recent scrutiny of big banks’ operations in the physical commodities markets and criticism of the Justice Department’s financial-crisis track record make it “quite understandable” that the agency would investigate allegations of precious metals price-rigging.
The bank said at the time that it regretted the situation that led to the settlement and has enhanced its controls. A Barclays spokesman declined further comment.
U.S. officials are investigating at least 10 major banks for possible rigging of precious-metals markets, even though European regulators dropped a similar probe after finding no evidence of wrongdoing, according to people close to the inquiries.
Prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday.
HSBC also
said the Justice Department sought documents related to the antitrust
investigation in November. The two probes “are at an early stage,” the
bank added, saying it is cooperating with U.S. regulators.
Also under scrutiny are Bank of Nova Scotia , Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Société Générale SA, Standard Bank Group Ltd. and UBS AG , according to one of the people close to the investigation.
Bank
representatives declined to comment or couldn’t be immediately reached. A
CFTC spokesman declined to comment, as did a spokeswoman for the
Justice Department.
The precious-metals probes are the latest example of regulatory scrutiny into how the world’s biggest financial institutions influence widely used benchmarks. Until last year, prices for gold, silver, platinum and palladium were set using a decades-old practice of once- or twice-a-day conference calls between a small group of banks. The process for setting each of the price “fixes” has since been overhauled.
Benchmarks for the four precious metals affect jewelry prices and financial products such as exchange-traded funds. U.S. commercial banks regulated by the Office of the Comptroller of the Currency had $115.1 billion of precious metals-related contracts outstanding as of Sept. 30.
Previously
launched investigations of the interest-rate and foreign-currency
markets have led to billions of dollars in settlements from major
financial firms. Related probes are continuing in the U.S. and Europe,
with additional cases against firms and individuals by the Justice
Department expected in the coming months, according to people familiar
with the matter.
In the interest-rate investigations, banks often reached settlements with U.S. and U.K. regulators, which made similar allegations of collusion in the rate-setting process. In contrast, the U.K. Financial Conduct Authority and German financial watchdog BaFin reviewed the precious-metals benchmarks but closed their inquiries without finding evidence of wrongdoing, according to people familiar with those probes.
Robert Hockett, a law professor at Cornell University, said it is “not particularly surprising” that the Justice Department is plowing ahead despite the decision by European regulators. Recent scrutiny of big banks’ operations in the physical commodities markets and criticism of the Justice Department’s financial-crisis track record make it “quite understandable” that the agency would investigate allegations of precious metals price-rigging.
Last year,
the FCA fined Barclays £26 million ($40.2 million) for lax controls
after one of its traders allegedly manipulated the gold fix at the
expense of a client.
The bank said at the time that it regretted the situation that led to the settlement and has enhanced its controls. A Barclays spokesman declined further comment.
