* German regulator has been investigating gold-fixing
* Deutsche move comes after scaling back commodity business
* Others may follow Deutsche's lead - source
* Deutsche, rivals embroiled in probes of FX, interest rates
By Eric Onstad
LONDON, Jan 17 Deutsche Bank will
withdraw from gold and silver benchmark price setting, it said
on Friday, as European regulators investigate suspected
manipulation of precious metals prices by banks.
Germany's largest bank and some of its rivals are taking a
battering over a series of other scandals and inquiries
regarding manipulation of interest rates and foreign exchange.
On Wednesday, global investigations into alleged currency
market manipulation intensified as U.S. regulators descended on
Citigroup's London offices and Deutsche suspended several
traders in New York, sources told Reuters.
Deutsche is one of five banks involved in the twice-daily
gold fix for global price setting and said it was quitting the
process after withdrawing from the bulk of its commodities
"Deutsche Bank is withdrawing its participation in the gold
and silver benchmark setting process following the significant
scaling back of our commodities business. We remain fully
committed to our precious metals business," it said in a
In mid-December, German banking regulator Bafin demanded
documents from Deutsche Bank under an inquiry into suspected
manipulation of benchmark gold and silver prices by banks, the
Financial Times reported, citing sources.
At the time, Deutsche declined to comment on the FT report.
Bafin reiterated in December that besides benchmark
interest-rate LIBOR and Euribor rigging by banks, it had been
looking at other benchmark-setting processes such as gold and
silver price fixings at individual banks.
Bafin declined to comment on Friday, but its President Elke
Koenig said the previous day that it was understandable that the
topic was attracting widespread concern.
"These allegations (about currencies and precious metals)
are particularly serious, because such reference values are
based - unlike LIBOR and Euribor - typically on real
transactions in liquid markets and not on estimates of the
banks," she said in a speech
A source close to Britain's Financial Conduct Authority
(FCA) said on Friday the regulator was doing a lot of work on
all benchmarks, including commodity benchmarks and gold. "So
there is a renewed regulatory focus on that," the source said.
Deutsche has also been named in cases related to the
sub-prime crisis, credit default swaps, mortgages, tax evasion
and a decade-old lawsuit suit brought by the heirs of late media
mogul Leo Kirch, who accuse the bank of undermining the
The bank set aside 1.2 billion euros for potential legal
charges in the third quarter, wiping out profit and raising the
total amount of legal reserves to 4.1 billion euros.
GOLD FIXING CRISIS?
A source close to Deutsche said on Friday it was seeking to
sell its gold and silver fixing seats to another member of the
London Bullion Market Association.
But Deutsche's decision may foreshadow moves by other fixing
banks, a source in the London precious metals market said. "It
wouldn't surprise me if the other banks were looking at pulling
out as well. Why would they want the aggravation?" said the
source, who declined to be named.
"The more worrying point is that, if you don't have the
fixing, what do you have? There's a lot of contractual business
done on the gold fix, and if you've got no basis for where the
price is, someone is going to lose out."
Withdrawal from the fixing was not expected to have an
impact on Deutsche's precious metals business, the source close
to the bank said. "A very small volume of business is executed
on the fix. The majority is outside of it."
Gold fixing happens by teleconference with four other banks:
Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc
, HSBC Bank USA, NA and Société Générale, all
of which declined immediate comment on the Deutsche move.
Chairmanship of the gold fixing rotates annually among the
member banks. The last time a fixing seat changed hands was in
2004, when N.M. Rothschild and Sons sold their seat to Barclays.
Two years earlier, Credit Suisse sold its seat to
At the start of each gold price-fixing, the chairman
announces an opening price to the other four members who relay
that to their customers, and based on orders received from them,
instruct their representatives to declare themselves as buyers
or sellers at that price.
The gold price is adjusted up and down until demand and
supply is matched at which point the price is declared "Fixed".
The fixings are used to determine spot prices for the
billions of dollars of the two precious metals traded each day.