* Bafin says finds evidence of attempted forex manipulation
* Says probe much bigger than into benchmark interest rates
* Probe doesn't relate to big currencies such as dollar/euro
(Rewrites first paragraph, adds quotes, context)
By Thomas Atkins and Jonathan Gould
FRANKFURT, May 20 Germany's financial watchdog
has discovered clear evidence that market participants attempted
to manipulate reference currency rates, widening the probe to
include many more banks and saying international investigations
into the matter were far from over.
Regulators globally are looking at traders' behaviour on key
benchmarks, spanning interest rates, foreign exchange and
commodities. Eight financial firms have been fined billions of
dollars for manipulating reference interest rates, and the probe
into the largely unregulated $5.3 trillion-a-day foreign
exchange market could prove even costlier.
Watchdog Bafin's head of banking supervision Raimund
Roeseler said discoveries in the forex probe were worrying and
it was "much, much bigger" than the investigation into benchmark
interest rates, such as Libor, that has dogged banks for years.
"There were clearly attempts to manipulate prices, that's
what was disturbing," Roeseler said on Tuesday at the
regulator's annual news conference. Market participants had
attempted to manipulate daily fixing rates for a number of
different currencies, he said without specifying what evidence
had been gleaned.
"It's not the really big currencies, not the dollar/euro,
but several currencies were involved," he said, noting the
Mexican peso was one of the currencies involved.
More than 30 foreign exchange traders at many of the world's
biggest banks have already been put on leave, suspended or fired
as forex probes in various countries expand.
However Roeseler's comments stand in contrast to what
Britain's Financial Conduct Authority (FCA) said in late April,
that it had yet to determine whether misconduct had occurred in
the forex market.
Elsewhere European Competition Commissioner Joaquin Almunia
told a news conference regulators had yet to decide on the next
step of the investigation into suspected rigging of forex rates.
"We are not yet at this moment when I can announce steps of this
case," he said.
Roeseler said all German banks with forex trading activities
have been asked to conduct internal probes and to submit their
findings to Bafin, indicating the investigation had taken a
wider dimension that previously known.
"This is a subject that is going to be with us for a long
time ... we're not going to be done in 2014 but hopefully before
2018," Roeseler said.
Benchmark foreign exchange rates, often referred to as
fixes, are essential to global financial markets and are used to
price trillions of dollars worth of investments and deals. They
are compiled using data from Thomson Reuters and other
providers and are calculated by WM Company, a unit of State
Deutsche Bank AG, Germany's largest bank and the
world's largest forex trader, is the country's only bank known
so far to be involved in the currency probe. The bank has said
it is conducting its own internal probe and is cooperating with
Roeseler said he expected to conclude an investigation into
the manipulation of reference interest rates during the summer.
Bafin will hand over responsibilities for supervising Germany's
top 24 banks to the European Central Bank (ECB) in November.
The regulator had clear evidence that there were efforts to
manipulate reference interest rates, but it remained unclear
whether those efforts were successful.
"We have some evidence of people trying to move the market
in one direction and they succeeded in doing precisely the
opposite," he said. "They shot themselves in the foot."
In separate comments about banking stress-test scenarios
being prepared by the ECB and the European Banking Authority,
Bafin President Elke Koenig said these would prove demanding for
some of the 24 participating German banks.
But the ECB's balance-sheet health check was unlikely to
yield big shocks for banks, she said.
"The base-case scenario in the stress tests shouldn't yield
any negative surprises," Koenig said. "I cannot rule out,
however, that the adverse stress scenarios will prove very
demanding for some banks."
Deutsche Bank on Sunday unveiled plans for an 8 billion euro
($11 billion) share issue designed in part to strengthen its
balance sheet ahead of the stress tests, expected to conclude in
October. Roeseler said Bafin did not put any pressure on the
bank to carry out that capital increase.
The bank health checks are being led by the ECB before it
becomes the top banking regulator in the euro zone in November.
Many of the 128 participating banks have been reducing risky
assets and increasing regulatory capital ahead of the exam.
In January, Koenig warned that some participating German
banks may face a capital shortfall in the stress tests.
($1 = 0.7289 Euros)
(Editing by David Holmes)