* Swiss competition body opens probe into eight banks on FX
* "Evidence exists that banks colluded" on FX rates -WEKO
* UK FCA to assess if banks have cut benchmark rigging risk
* FX market could take years to recover - industry chief
(Adds details from UK financial watchdog)
By Caroline Copley and Patrick Graham
ZURICH/LONDON, March 31 Swiss and British
regulators stepped up their scrutiny of alleged manipulation of
foreign exchange markets on Monday, as watchdogs take a closer
look at whether banks have a tight enough grip on the behaviour
of their traders.
Switzerland's competition commission WEKO said it opened an
investigation into several Swiss, British and U.S. banks over
potential collusion to manipulate currency rates.
The UK Financial Conduct Authority (FCA), meanwhile, said it
will assess if banks have cut the risk of traders manipulating
benchmark rates in the coming year, to see if lessons have been
learned from the scandal over benchmark rate rigging.
WEKO said it is investigating UBS, Credit Suisse
, Zuercher Kantonalbank (ZKB), Julius Baer,
JP Morgan, Citigroup, Barclays and Royal
Bank of Scotland.
"Evidence exists that these banks colluded to manipulate
exchange rates in foreign currency trades," WEKO said, adding it
assumed the most important exchange rates were affected.
Regulators around the world are looking closely at traders'
behaviour on a number of key benchmarks, spanning interest
rates, foreign exchange and commodities markets.
Eight financial firms have already been fined billions of
dollars by U.S. and European regulators in the past two years
for manipulating benchmark interest rates and several more are
The probe into currency trading could be even more costly.
Authorities in the United States, Britain, Switzerland, Germany
and Singapore are looking into allegations of collusion and
manipulation by traders at major banks of the largely
unregulated $5.3 trillion-a-day foreign exchange market.
"Even if there is no further alleged wrongdoing, the current
concerns will take years to work out," said Marshall Bailey,
head of the ACI Financial Markets Association, the sector's main
international umbrella organisation.
Credit Suisse said it was "astonished" to be drawn into such
a probe after not being subject to a preliminary investigation
last year. It said WEKO's statement contained incorrect
references to Credit Suisse which were "inappropriate and
harmful" to its reputation.
Aside from the fines, banks fear that the response to the
row from international regulators and politicians will put an
end to the self-regulation model the sector has championed for
decades and, in the process, raise the cost of foreign exchange
dealing for banks, companies and individuals.
WEKO said it was in touch with some international
authorities but had not been prompted by a foreign authority to
open the investigation. "We have to conduct the investigation
ourselves. There's no legal basis at the moment to exchange data
directly with foreign authorities," WEKO Director Rafael Corazza
WEKO opened a preliminary investigation last October after
learning about potential manipulation of foreign exchange
Julius Baer said an internal investigation had found no
evidence of foreign exchange market abuse. Zuercher
Kantonalbank, Switzerland's biggest regional bank, said it would
cooperate with authorities.
RBS said it would co-operate with any investigation, but
declined further comment. UBS, JP Morgan, Barclays and Citi all
declined to comment.
WEKO Vice Director Olivier Schaller said the WEKO
investigation would take months and could result in fines of up
to 10 percent of the turnover generated in the relevant market
in Switzerland over the last three years.
UBS last week suspended up to six FX traders, bringing the
total number of traders suspended, placed on leave or fired to
The Swiss National Bank (SNB) last year estimated the daily
turnover in foreign exchange markets of 25 sizeable banks in
Switzerland amounted to $216 billion.
London dominates foreign exchange trading, accounting for
40.9 percent of global turnover last year, compared with 18.9
percent in the United States and 3.2 percent in Switzerland,
according to Bank of International Settlements (BIS) data.
The FCA said it will also look at whether investment banks
are handling potential conflicts of interest adequately and
ensuring so-called "Chinese walls" are strong enough - to
prevent confidential information received in one part of the
business not being abused by a different part of the business.
(Additional reporting by Steve Slater, Silke Koltrowitz, Oliver
Hirt, Rupert Pretterklieber and Anirban Nag; Editing by Jane
Merriman and David Holmes)