UPDATE 3-Swiss watchdog opens bank probe into precious metal collusion

28 Sep 2015 | Author: | No comments yet »

Swiss Investigate Seven Firms Over Precious Metals Market Trading.

The Swiss competition watchdog has launched an investigation into possible collusion in the precious metals market by several major banks, in the latest in a string of inquiries into gold, silver, platinum and palladium pricing. Switzerland’s competition regulator identified seven banks that are being investigated as part of a probe into whether companies in Europe, the U.S. and Japan colluded to manipulate the prices of gold, silver and other precious metals.

Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks. UBS Group AG, Deutsche Bank AG, HSBC Holdings Plc, Barclays Plc, Morgan Stanley, Julius Baer Group Ltd. and a unit of Tokyo-based trading company Mitsui & Co.

Switzerland’s Weko watchdog said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads. “It [Weko] has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned,” Weko said in a statement. Last month, the European Union’s competition watchdog said it is investigating alleged “anticompetitive behavior” in precious metals spot trading.

A spokesman for the watchdog said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules. European Union antitrust regulators in August disclosed they are investigating precious-metals trading, specifically anti-competitive behavior in spot trading, following a U.S. probe that embroiled some of the same banks. The banks face financial penalties if Weko finds them guilty of wrongdoing, the spokesman said, though he declined to comment on the size of any possible fine.

Last year, Switzerland’s financial regulator Finma found that employees at UBS had “at least attempted” to manipulate precious metals prices and foreign-exchange rates and forced the bank to hand back 134 million Swiss francs ($136.9 million) in related profits. That year, the U.K.’s financial regulator fined Barclays £26 million ($39.5 million) for its role in irregularities around the fixing of a daily gold price benchmark. The scrutiny follows international probes into the rigging of financial benchmarks for rates and currencies, which have yielded billions of dollars in fines. A WEKO spokesman said that if the regulator uncovers misconduct, it would be able to fine the banks the equivalent of up to 10% of their proceeds in Switzerland resulting from the alleged manipulation. UBS, which did not immediately return requests for comment Monday, said in May it had won immunity from criminal fraud charges in the US probe, after agreeing to provide the Justice Department with information about precious metal transactions.

UBS also said it would receive conditional immunity from prosecution by the United States Justice Department’s antitrust division, reflecting its role as the firm that first reported potential misconduct to the department. Commodities traders shift raw materials such as oil, gold and copper around the world, taking advantage of price discrepancies between different regions, and bolster their trading book with bets on commodities-related derivatives. In May, four major banks pleaded guilty to trying to manipulate forex rates and, with two others, were fined nearly $6-billion in another settlement in a global investigation into the $5-trillion-a-day market. There are also moves under way to reform the century-old method of gold price “fixing”, since the current global benchmark, London’s Gold Fix, has already been tainted by a rigging scandal and attacked by critics as old-fashioned. Following the news, the two Swiss banks on COMCO’s list, UBS and Julius Baer, saw their share prices slump 1.16 and 1.08 percent respectively in late morning trading, as the Swiss stock exchange’s main SMI index fell just 0.24 percent.

Banks have said that they are refocusing resources on more profitable parts of their business, while analysts say that the sector has become more costly to operate in amid increased regulation and other factors. The UK Financial Conduct Authority (FCA) last year fined Barclays 26 million pounds ($43.8-million) for failures in internal controls that allowed a trader to manipulate how gold prices were set. The FCA said the commodities trading firms that it reviewed were complacent about the risks of market abuse, and that many firms believe commodity markets are “too deep, too liquid, and there are too many participants” for them to be manipulated.

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