The Federal Reserve is investigating whether traders at the world’s biggest banks rigged benchmark currency rates, raising the risk that firms will be penalized for lax controls as regulators look for wrongdoing.
Bloomberg reports that the Fed, which supervises U.S. bank holding companies, is among authorities from London to Washington probing whether traders shared information that may have let them manipulate prices in the $5.3tril-a-day foreign-exchange market to maximize their profits, said a person with direct knowledge of the matter, asking not to be named because it’s confidential.
'The Fed has discretion whether to and how much to fine the banks if deficient controls or lack of supervision resulted in traders at these banks manipulating currency rates', said Jacob S. Frenkel, a former federal prosecutor and now a lawyer at Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland.
The Fed punished firms for internal-control lapses last year as it worked with state and federal authorities on cases involving Iranian sanctions and botched derivatives bets. The foreign-exchange inquiry looks at benchmark WM/Reuters rates used by companies and investors around the world.
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image: © Lisamarie Babik