Evaluation of Major Banks Threatens to Leave FX Settlements in Stasis

Deutsche Bank AG and Barclays Plc are presently facing an evaluation that could lead to lapses or delays in the

Deutsche Bank AG and Barclays Plc are facing the tangible prospect of holdups for their foreign exchange (FX) settlements, given an ongoing evaluation by the New York State (NYS) Department of Financial Services over currency manipulation.

The NYS Department of Financial Services, as well as their superintendent Benjamin Lawsky have warned that the evaluation of electronic trading in FX for both Deutsche Bank and Barclays could linger on for several months, according to a recent Wall Street Journal report.

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While such delays or lapses in regulatory investigations or evaluations are hardly out of the ordinary, the scenario does present a dilemma for both institutions, namely as it could hold up FX settlements. As a result, Mr. Lawsky has championed an alternative strategy, suggesting that it may be worthwhile to abolish electronic trading out of FX settlements for his portion of the negotiations with those banks.

The past year has seen a number of regulatory finalities and fines being enforced against some of the biggest banks in the industry, given their respective role in the manipulation of currency rates. While a series of settlements have already transpired, Barclays was a notable omission from a November settlement with several regulators –  the U.S. Justice Department is still in talks on settlements with several banks.

According to Mr. Lawsky in a recent statement on the handling of the evaluation, “I don’t think DFS is in a position to settle these matters until it is done with electronic trading or if electronic trading was carved out of settlements. Active monitors are in there right now, there’s a lot of data.”

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