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Gold and silver prices: The next bank rigging scandal?
US authorities open investigations into banks including HSBC and Barclays over possible rigging of precious metals benchmarks
The process for setting the gold price has been overhauled Photo: Reuters
By James Titcomb
12:36PM GMT 24 Feb 2015
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The world's biggest banks are still reeling from the consequences of the Libor and foreign exchange scandals, but US authorities are now investigating the possibility of more rigging.
Several banks are being scrutinised over how they set influential benchmarks in the markets for gold, silver, platinum and palladium in London, with at least 10 under investigation from the Department of Justice (DoJ) and Commodities and Futures Trading Commission (CFTC), according to reports.
The benchmarks, which influence the prices of financial products as well as valuable jewellery, were set by a telephone conference call by a group of banks until last year, when they were overhauled amid mounting scrutiny of market rigging.
The Financial Conduct Authority, which fined Barclays £26m in May for failings that saw a trader attempt to manipulate the gold fix, has decided against an investigation, as has its German counterpart.
However, the DoJ and CFTC have opened investigations. Benchmark prices are now set electronically after a reform of the system, so the probes are expected to focus on past procedures.
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HSBC's annual report, released as the bank unveiled a 17pc drop in annual profits, revealed that the CFTC had issued a subpoena to the bank, demanding information about its US business's precious metals trading operation.
Additionally, the DoJ has requested information from the bank. HSBC said it was complying with the investigations, but that it was unable to estimate any impact on the bank.
The Wall Street Journal reported that Barclays is also in the spotlight, as are Goldman Sachs, UBS, JPMorgan, Deutsche Bank, Credit Suisse, Standard Bank, Societe Generale and Scotiabank.
Many of the banks are embroiled in civil lawsuits claiming they manipulated the prices of precious metals.
HSBC's disclosure in its annual report
The "fixes" for the precious metals had been arranged in the same way for years, with a small group of banks submitting prices to agree a benchmark price, in a similar way to how the Libor interest rate benchmark and foreign exchange benchmarks are arranged.
The process for the precious metals benchmarks are being reformed in the wake of recent scandals, to make the process more transparent.
UK regulators are currently devising new rules for such benchmarks, in order to restore trust in London's wholesale markets.
Banks have been fined billions of pounds for their roles in the Libor and foreign exchange scandals. The banks did not comment.
US authorities open investigations into banks including HSBC and Barclays over possible rigging of precious metals benchmarks
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The process for setting the gold price has been overhauled Photo: Reuters By James Titcomb
12:36PM GMT 24 Feb 2015
Follow
45 Comments The world's biggest banks are still reeling from the consequences of the Libor and foreign exchange scandals, but US authorities are now investigating the possibility of more rigging.
Several banks are being scrutinised over how they set influential benchmarks in the markets for gold, silver, platinum and palladium in London, with at least 10 under investigation from the Department of Justice (DoJ) and Commodities and Futures Trading Commission (CFTC), according to reports.
The benchmarks, which influence the prices of financial products as well as valuable jewellery, were set by a telephone conference call by a group of banks until last year, when they were overhauled amid mounting scrutiny of market rigging.
The Financial Conduct Authority, which fined Barclays £26m in May for failings that saw a trader attempt to manipulate the gold fix, has decided against an investigation, as has its German counterpart.
However, the DoJ and CFTC have opened investigations. Benchmark prices are now set electronically after a reform of the system, so the probes are expected to focus on past procedures.
Related Articles
- HSBC 'shamed' by Swiss tax scandal as annual profits fall 17pc
23 Feb 2015 - Barclays fined £26m over gold price failings
23 May 2014 - Banks could lose control of gold fix
07 Jul 2014
HSBC's annual report, released as the bank unveiled a 17pc drop in annual profits, revealed that the CFTC had issued a subpoena to the bank, demanding information about its US business's precious metals trading operation.
Additionally, the DoJ has requested information from the bank. HSBC said it was complying with the investigations, but that it was unable to estimate any impact on the bank.
The Wall Street Journal reported that Barclays is also in the spotlight, as are Goldman Sachs, UBS, JPMorgan, Deutsche Bank, Credit Suisse, Standard Bank, Societe Generale and Scotiabank.
Many of the banks are embroiled in civil lawsuits claiming they manipulated the prices of precious metals.
HSBC's disclosure in its annual report
The "fixes" for the precious metals had been arranged in the same way for years, with a small group of banks submitting prices to agree a benchmark price, in a similar way to how the Libor interest rate benchmark and foreign exchange benchmarks are arranged.
The process for the precious metals benchmarks are being reformed in the wake of recent scandals, to make the process more transparent.
UK regulators are currently devising new rules for such benchmarks, in order to restore trust in London's wholesale markets.
Banks have been fined billions of pounds for their roles in the Libor and foreign exchange scandals. The banks did not comment.
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