Goldman Sachs & Lloyds Banking Group Drawn Into FX Market Manipulation Investigation

As financial institutions are still paying billions in fines for the LIBOR and Euribor scandals, a wave of new investigations

FINMAOn November 6, Goldman Sachs Group, the biggest investment bank in the US and Lloyds Banking Group, one of the largest retail banks in the UK, became the latest major financial institutions to admit they are cooperating with the recent wave of international FX rates manipulation investigations, exposed since the Swiss Financial Market Supervisory Authority (FINMA) announced it is looking into possible manipulation of foreign exchange markets.

As Forex Magnates continues to report, investigations of FX rates’ manipulation are underway in a number of countries and have become known to the public since FINMA announced it had received allegations of manipulations by multiple financial actors.

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The investigations seem to focus on chat groups in which dealers sent instant messages over their Bloomberg terminals. For a period of three years, in chat groups with names such as “The Cartel” and “The Bandits’ Club,” bank traders allegedly shared information with competitors allowing them to execute their own trades before filling client orders, and joked about drug use and their ability to manipulate the benchmark FX rates.

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In its quarterly report filed to the Securities and Exchange Commission (SEC) on November 6, Goldman Sachs, the powerful American investment bank, added currencies and commodities to a list of regulatory investigations and reviews relating to the firm’s business.

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The list included financial practices, such as compliance with the SEC’s short-sale rule, algorithmic trading, transaction reporting, “communications in connection with the establishment of benchmark rates,” and insider trading. Goldman Sachs reported it is cooperating with all such regulatory investigations and reviews.

Around the world, regulators of currency markets like the UK’s Financial Conduct Authority, and legal authorities like the American Federal Bureau of Investigation confirmed the existence of their own investigations into the matter. BarclaysHSBC, UBS, Deutsche Bank, JP Morgan, Citigroup and RBS have all already acknowledged the investigations, and it has been reported that some FX traders were suspended from their jobs as a result.

LLOYDSLloyds Banking Group, one of the top biggest banks in the UK, announced on November 6, the same day as Goldman Sachs, that it is aware that a number of regulatory and enforcement authorities are investigating foreign exchange trading. According to the statement from the bank, as a result of these investigations the bank’s management said: “We believe it is prudent to review our own foreign exchange trading over recent years and have commenced such a review.”

Major financial institutions have already been ordered to pay fines in excess of $3.5 billion by international regulators, as a result of investigations into attempted manipulation of the London Interbank Offered Rate (LIBOR) for U.S. dollar, yen and sterling, and for attempted manipulation of the Euro Interbank Offered Rate (Euribor).

The total effect of the LIBOR and Euribor investigations is not yet known as the issue is still developing, as for example, on November 8, the Serious Fraud Office in the U.K. announced it wishes to interrogate three former ICAP brokers already charged in the U.S. over the matter.

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