Expats may have been the victims of a banking scandal involving the fixing of foreign currency exchange rates, according to financial watchdogs.
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International regulators are investigating banks and foreign currency exchanges to examine how they set rates.
The crackdown has already seen nearly 40 international traders suspended or sacked.
The inquiry is spearheaded by the German financial regulator Bafin.
Head of banking supervision Raimund Roeseler says the regulator has evidence that traders in the foreign currency exchange market colluded to manipulate rates.
He also explained that the inquiry has many leads to follow and expects more banks and traders around the world to be drawn into the net.
Billions paid in fines
Eight foreign currency trading firms have already faced fines of billions of dollars for the part they played in manipulating rates.
The scandal follows in the wake of banks facing billions in fines for fixing the London Interbank Offer Rate (LIBOR) and calls for an inquiry into how the gold spot rate is fixed spurring an investigation in London by the Financial Conduct Authority.
Bafin says the foreign currency exchange manipulation is potentially on a much larger scale than the LIBOR fix because the international market is largely unregulated with £3.2 trillion a day changing hands in millions of transactions.
“It’s clear that traders manipulated prices,” said Roesler. “The allegations involve daily spot rates for several currencies. The big currencies are not really too involved, like the US dollar or euro, but the main one seems to have been the Mexican peso.”
The European Union competition commissioner Joaquin Almunia has announced that regulators are working hard behind-the-scenes to get to the bottom of the scandal but that the inquiry may not end until at least 2018.
Benchmark exchange rates
“The foreign currency exchange industry is going to live with this for some while,” he said. “At this stage I cannot reveal the nature of the inquiries or who is involved, but can confirm they are widespread and go back for a number of years.”
The investigation is looking at how banks and traders set benchmark exchange rates for currencies. These rates are the basis of pricing investments and financial transactions worth trillions of pounds every day.
Deutsche Bank is the world’s biggest forex exchange trader and has been confirmed as involved in the currency inquiry. The bank has recently resigned from the gold fix panel as regulators turn their gaze onto possible irregularities in that market as well.
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