UBS, Deutsche Bank Probed Over Foreign Exchange
ZURICH--Two of the top currencies-dealing banks confirmed their involvement in a global investigation into possible manipulation of the foreign-exchange markets Tuesday.
UBS said it has "taken and will take appropriate action with respect to certain personnel" in the course of an internal review into the matter.
Spokespeople for the Swiss bank--the world's fourth-biggest currencies dealer--declined to comment further on the matter. It is unclear what form this personnel action takes, and whether it affects one employee, or more.
Germany's Deutsche Bank AG--the No. 1 currency-dealing bank by market share--also noted in its quarterly earnings report that it was cooperating with investigations, which it said are in their "early stages."
Regulators in the U.K., U.S., Hong Kong and Switzerland are among a number of agencies involved in the investigation into possible currency-market manipulation. Britain'sFinancial Conduct Authority says it started to look into potential manipulation of the FX markets in April.
UBS said in its quarterly earnings report that it launched an internal probe of its foreign-exchange business in June. UBS noted that it and other major currencies-dealing banks have "received requests from various authorities relating to their foreign exchange businesses."
A central issue in the investigations is the foreign-exchange "fixes"--snapshots of traded rates on an electronic marketplace captured at 4 p.m.London time five days a week, according to people familiar with the matter. One focus for authorities in the U.K. is an electronic chat room populated by top traders at financial institutions going variously by the name of "The Club," "The Bandits" Club," "The Dream Team" and "The Cartel."
The Wall Street Journal reported earlier this month that Royal Bank of Scotland Group PLC had turned over electronic communications by a former employee to the FCA.
Citigroup Inc. is also cooperating with authorities around the world with their investigations, according to people familiar with the matter. Earlier this month, Urs Rohner, chairman of Credit Suisse AG, the world's eighth-largest currency dealer, said in an interview with a Swiss newspaper that his firm is searching records in connection with the investigation and has so far found "no evidence of malpractice." He added that "to date it is still not clear what precisely the topic of investigation is."
UBS has been beset with a number of legal and regulatory issues in the wake of the financial crisis. In December, the bank paid about $1.5 billion to settle charges related to interest-rate manipulation. In November, Swiss regulator Finma penalized UBS after a former trader at the firm's investment bank turned up a surprise $2.3 billion trading loss. Also in its earnings report, the bank said it chalked up 586 million Swiss francs ($654 million) in provisions for litigation and regulatory matters in the period, while warning that "elevated" charges for such issues will continue through next year.
In addition, UBS said Finma recently required it to stock up on capital in order to brace for further "unknown litigation." That in turn could delay the bank's plans to reach a total return on equity of 15% by 2015, UBS said.
UBS said its overall net profit was 577 million francs for the third quarter. Analysts had been expecting a profit of 569 million francs.
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