Deutsche Bank under scrutiny in gold price-fixing probe

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Frankfurt - German banking regulator Bafin has demanded documents from Deutsche Bank as part of a probe into suspected manipulation of benchmark gold and silver prices by banks, the Financial Times reported, citing sources.

Bafin has questioned the bank's staff during several on-site inspections over the past few months, the newspaper said on its website, citing people familiar with the matter.

Bafin on Friday repeated that besides Libor and Euribor, it has been looking at other benchmark setting processes like gold and silver price fixings at individual banks.

“The examinations were launched several months ago and are still ongoing,” a Bafin spokesman said.

He declined to comment on the newspaper's report but said Bafin has the power to conduct interviews and request documents or other information from banks in its enquiries.

Following probes into benchmark interest rate rigging by banks, Bafin is investigating whether traders may have colluded to influence the level of the precious metals benchmarks for their own benefit, a source close to the regulator had said in late November, adding no concrete evidence of wrongdoing had been found so far.

Deutsche Bank is the only German lender involved in gold fixing and is part of the investigation, the source had said.

Deutsche Bank is also one of three banks that take part in the equivalent process for silver.

The regulator, meanwhile, is also examining the derivatives index Isdafix.

Currently, gold fixing happens twice a day by teleconference with five banks: Deutsche Bank, Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc, HSBC Bank USA, NA and Societe Generale.

The fixings are used to determine prices globally.

Deutsche Bank declined to comment on Friday.

 

BIG REVAMP

Germany's biggest lender announced last week that it was pulling the plug on its global commodities trading business in energy, agriculture, base metals, coal and iron ore, although it would continue trading in precious metals and financial derivatives.

The move came as the financial sector's role in commodity trading has been squeezed by lower margins, higher capital requirements and growing political and regulatory scrutiny of the role of banks in the natural resources supply chain.

Deutsche Bank has been pursuing an ambitious cultural transformation plan led by its co-chief executives Juergen Fitschen and Anshu Jain, and as it works through a long list of scandals, investigations and fines that came in the wake of the financial crisis.

The bank set aside 1.2 billion euros ($1.65 billion) for potential legal charges in the third quarter, wiping out profit and raising the total amount of legal reserves to 4.1 billion euros.

EU antitrust regulators this month slapped Deutsche Bank with a 725 million euro fine, the biggest penalty handed out to six banks in the regulators' probe into rigging of the Libor and Euribor benchmark interest rates.

The Libor interest rate scandal has prompted authorities and banking industry bodies worldwide to overhaul rate-setting processes. Probes are also under way in the United States and Britain.

Britain's Financial Conduct Authority had asked those who administer major, non-interest rate-related benchmarks, including gold, to assess by July next year how they comply with new global regulatory principles governing all types of indexes following the Libor scandal.

The FCA declined comment on Friday. - Reuters



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