Banks face another rate fixing scandal

Published: 11 Nov at 9 AM Tags: Euro,

Some of the biggest banks on the planet are being investigated as part of a probe into possible foreign exchange rate rigging. The list of financial institutions includes Credit Suisse, Goldman Sachs, JPMorgan, Royal Bank of Scotland, HSBC, Barclays, Citigroup, Deutsche Bank and UBS.

The banks are either being probed by regulators or are undertaking internal investigations. Many of the institutions figured prominently in the recent Libor scandal. Among the authorities from around the world who will be conducting the latest investigation into rate rigging are Britain’s Financial Services Authority, the European Commission, Hong Kong’s Monetary Authority and the US Department of Justice.

Currency rates are set by a pooling together of prices throughout the day by banks that deal in that currency. However, just as happened with the Libor scandal, any benchmark that is set by price submissions from market players is always going to be flawed because it is open to abuse.

Industry insiders are concerned that the probe into forex rate fixing could blow up and create further mistrust in financial institutions. Since the global financial crisis, which unveiled a cowboy culture of greed throughout the financial sector, banks have been struggling to regain the trust of their customers.

Another scandal will put increased pressure on regulators to step in and impose harsh reforms.