The head of the Financial Conduct Authority (FCA) – the UK’s financial watchdog – has stated the forex exchange rate-fixing allegations are “every bit as bad” as the Libor scandal.
Benchmark foreign exchange rates determine the value investments totalling trillions of dollars.
Martin Wheatley told MPs at the Treasury Select Committee that ten banks were now aiding its investigation into whether traders banded together to set certain key exchange rates in the forex market – which trades GBP 3 billion a day.
Libor rigging scandal
The Libor interest rate scandal has seen international banking giants such as Barclays and UBS paying out USD 6 billion in fines.
In addition, traders were suspended who were found to have set the Libor rate (used to mark the cost of inter-bank borrowing) after colluding on online chat rooms.
Now, some of the same banks hit by the Libor scandal are cooperating with the FCA and other regulators in the forex probe.
To this end, Wheatley told the committee the FCA‘s probe had been widened to encompass “a number of other benchmarks that operate in London.”
He also stated the “surprise” had been how strong the allegations have become.
Several of the MPs in the committee pressed Wheatley for reassurance that the FCA was the lead regulator into the investigation of foreign exchange rates manipulation.
Other regulators including those in the USA and Switzerland are also investigating, yet London’s central position within the market means the FCA’s investigation is particularly important.
Wheatley stated: “The activities happened in London and we have the lead position in terms of access to information and traders,” before stating that in total, ten banks are cooperating with the probe.
Several banks have already launched internal investigations – including Barclays – and have suspended traders.
Yet whilst Wheatley talked of work already done, he cautioned the committee that conclusions may not be given this year.
“I hope that we will next year [yet] we are still in the investigation phase.”