As more and more stories about high level Forex manipulation continue to break, the German Banking Watchdog has expressed its concern about the magnitude, the incredibly large scale, of the attempted foreign exchange manipulation that has taken place, or is alleged to have taken place, in several of their domestic banks. Deutsche Bank AG, the largest and most high profile bank in Germany, is currently being investigated by the watchdog for possible misconduct, and the conclusion of this investigation is expected to be announced early next year.
The head of bank regulation at BaFin, Raimund Roeseler, is taking the allegations of Forex manipulation very seriously and, in an interview with The Wall Street Journal, said that “The individual cases of attempted currency manipulation are nothing to be relaxed about”. Whilst the investigation into the alleged Forex manipulation at Deutsche Bank AG has yet to be completed, Mr Roeseler has not yet ruled out the magnitude of the problem being so large that it is on the same scale as the similar scandal that has surrounded the rigging of the London interbank offered rate, or Libor. The impact that this will have on the bank, and in turn on its patrons, is yet to be seen.
High Profile Departures
As a result of this investigation, both Deutsche Bank AG and their domestic rival Commerzbank AG have conducted internal investigations into the scandal, which has resulted in both banks choosing to either suspend (pending further investigation) or fire outright, several individual traders who were found to have manipulated rates to their own advantage, rigging rates in a market that is worth $5.3 trillion globally. These firing and suspensions took place amid a host of internal investigations, which have been taken as a sign that the banks are fully cooperating with the authorities in the mist of these high profile allegations and executive departures.
A Difficult Time for Deutsche Bank
These new allegations and the new investigation comes in what has already been a difficult period for the bank. German regulators have already accused the bank of having a broken corporate culture, and this has lead to some high profile resignations from the bank, with the co-chief executives, Anshu Jain and Jürgen Fitschen announcing quite unexpectedly in June that they would resign. This difficult period is simply the backdrop to the largest scandal faced by the bank, when they were fined a record breaking $2.5 billion charge due to allegations that its traders had artificially rigged the Libor rate. Whilst the result of this current investigation have yet to be announced, the bank is bracing itself for another hefty fine, and for the impact that this will have on its finances as well as on its international reputation and its all-important reputation with its customers and clients.
Despite the fact that Mr Jain has resigned from the bank, he is still the focus of the BaFin investigation, with many individuals feeling that the banker has been scapegoated and used as a convenient figure head for the scandal. In fact, at this point BaFin have, in part at least, cleared Mr Jain of some of the charges and allegations that were made against him. They outright stated that they no longer suspect that German central-bank officials were purposely misled by the banker when they posed several private queries to him, however they are still unable to say just how much of the illegal activity taking place in the bank that Mr Jain was both aware of, or helping to encourage. Some senior Deutsche Bank officials at the bank feel that Mr Jain has been unfairly singled out by the regulators, and have made these views privately widely known. However, Mr Jain is still the main focus of an independent BaFin investigation. Until the investigation has been concluded, Mr Jain’s actions are still the focus of much media attention, and his career has, effectively, been left in tatters.
Additional Information
“Forex focus: Ways to protect yourself when uncertainty bites”, The Telegraph, http://www.
“German watchdog worried over Forex manipulation”, Market Watch, http://www.marketwatch.
“Banks face new legal action over Forex manipulation”, BBC News, http://www.bbc.co.uk/
“Business Insurance”, QZ, http://www.
“Deutsche Bank under fresh fire over Libor”, Financial Times, http://www.ft.com/cms/
