Brazil probes currency market activity of 15 global banks

Thu Jul 2, 2015 5:15pm EDT
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By Guillermo Parra-Bernal and Leonardo Goy

SAO PAULO/BRASILIA (Reuters) - Fifteen of the world's largest banks are under investigation on suspicion of rigging the Brazilian currency, antitrust watchdog Cade said on Thursday, the first such probe in one of the busiest foreign exchange markets globally.

In a document, Cade alleged that the banks colluded to influence benchmark currency rates in Brazil by aligning positions and pushing transactions in a way that deterred competitors from the market between 2007 and 2013, at least. Foreign exchange trading in Brazil is estimated at about $3 trillion a year, excluding swaps and derivative transactions.

The banks named in the Cade probe are Bank of America Merrill Lynch (BAC.N: Quote), Bank of Tokyo-Mitsubishi UFJ [MTFGTY.UL], Barclays Plc (BARC.L: Quote), Citigroup Inc (C.N: Quote), Credit Suisse Group AG CSGN.VX, Deutsche Bank AG (DBKGn.DE: Quote), HSBC Holdings Plc (HSBA.L: Quote), JPMorgan Chase & Co (JPM.N: Quote), Morgan Stanley & Co (MS.N: Quote), Nomura Holdings Inc (8604.T: Quote), Royal Bank of Canada (RY.TO: Quote), Royal Bank of Scotland Group (RBS.L: Quote), Standard Bank Group Ltd (SBKJ.J: Quote), Standard Chartered Plc (STAN.L: Quote) and UBS AG UBSN.S.

The Brazilian investigation comes weeks after six of the world's largest financial institutions agreed to pay $5.8 billion to the U.S. government to settle charges of currency rigging. The U.S. probe took more than five years and five of those banks, which are being probed by Cade, pleaded guilty.

Globally, currency trading is estimated at around $4.7 trillion a day and has been targeted in recent government probes in Europe, the United States and Japan. Those probes allege that banks prioritized the execution of their own currency trades at the expense of client orders, taking advantage of the fact that those deals often take place away from exchanges.

The Cade probe highlights the growing importance of international cooperation in efforts to root out different forms of market rigging. It sets a milestone for a country long characterized for lax law enforcement standards for white-collar crime.

"The probe will probably follow similar patterns to those that took place in larger financial hubs, with banks seeking a settlement with Cade instead of fighting the accusations in courts," said Luís André de Moura Azevedo, a capital markets law professor with Fundação Getulio Vargas in São Paulo.

There were no signs that Brazilian banks participated in the scheme, Cade superintendent Leonardo Frade said at a news conference in Brasilia. The watchdog has yet to estimate how much money the banks or the individuals cited in the probe made with the scheme, he added.   Continued...

A man walks past a board showing the Real-U.S. dollar exchange rates in Rio de Janeiro March 4, 2015. REUTERS/Sergio Moraes