The dark cloud of suspicion hanging over Lloyds Banking Group Plc has just become a little darker with the recent news surrounding Martin Chantree, a senior currency dealer at the company, having allegedly colluded with BP Plc in an attempt to manipulate a foreign exchange transaction worth nearly $500 million, via a Bloomberg statement.
The allegations against the recently embattled Lloyds Bank – already in the midst of an investigation into the rigging of benchmark currency rates – stipulate that Chantree received instructions from the bank’s internal treasury department to sell $500 million or £300 million in a trade, irrespective of movements to an unknown recipient at the oil company BP. Indeed, currency manipulation has become commonplace at the present, with several banks colluding to rig currency rates in an industry that deals nearly $5.3 trillion a day.
Currency Manipulation in Vogue
However, the recent trading leakage by Lloyds proved to be a disastrous one for the company, costing the bank nearly $750,000 (£450,000) as the British pound incurred a drop of 16 basis points (0.16%) against the US dollar in the minutes surrounding the execution of the order.
According to Charles Kuhn, a lawyer at Hickman & Rose, in a statement on the behavior, “Leaking price-sensitive information may well amount to the offenses of market abuse or insider dealing. Increasingly regulators are prepared to take robust action against the individuals and institutions that they believe to be involved in such conduct. The consequences for someone passing on their entire position to an unauthorized third party are likely to be severe.”
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That the recipient of sensitive trading information is not a financial institution or bank serves as the latest chapter of an extant investigation that seems to be just scratching the surface, with global regulators already clamping down on forex manipulation. These probes have resulted in the suspension, resignation, or firing of nearly 20 traders, incriminating the industry’s largest banks. Lloyds suspended Chantree back in early February, as the bank had approached the Financial Conduct Authority (FCA) after discovering voice communications involving Chantree and the alleged leakage of currency trading information.
Statements from Lloyds Bank and BP Ring Hollow as Probes Deepen
“We take individual allegations of this nature very seriously, and we immediately launched an investigation into the specific allegations raised. The investigation is ongoing, and as it is at a very early stage it would be inappropriate to speculate on its outcome at this time,” Lloyds added in an e-mailed statement to Bloomberg.
As Europe’s second-largest oil company, BP is an active buyer and seller of numerous currencies as a hedge against movements in foreign exchange rates. However, the most recent accusations of an information leak with Lloyds threaten to implicate the company, adding it to the long list of firms already under investigation for currency fixing. BP has since released a statement, refuting the allegations and stating that, “BP did not sell sterling until after it was widely known in the market that Lloyds was an active seller. We strongly refute any suggestion that any BP FX traders engaged in inappropriate trading activity.”
According to Andre Spicer, a professor at the Cass Business School in London, who’s researching the behavior of traders, “There’s a very tight network between foreign exchange traders. If they want to make a career in the market, they need to keep sweet with each other rather than with their employer.” As such, currency scandals have already roiled the forex industry, particularly on the institutional scale as new regulation looks to clamp down on illicit collusion and curb this behavior. Lloyds has been at the forefront of a sprawling investigation into the forex manipulation, however it is not alone in its actions.