25 January 2019

Four global banks fined for Korean forex rigging

Global banks colluding with Korean companies rack up 693 million won and warned of consequences of further breaches.

The Korean Fair Trade Commission (FTC) has fined four global banks operating in Korea for illegally sharing information and colluding in price bids to win foreign exchange derivatives contracts from five domestic companies.

FTC warning

The unnamed companies and four investment banks were hedging risks against currency swings and volatility through those contracts including currency swaps. Prior to companies looking to assign the banks to manage their contracts in equal volume, the banks offered the same price to avoid competition. JPMorgan Chase received the biggest fine of 251 million won ($223,000), followed by HSBC with a 225 million won fine. Deutsche Bank gets a penalty of 212 million won, and Standard Chartered (SC) Bank Korea has 5 million won in fines. All combined, the four banks will have to pay 693 million won. The FTC also issued a warning consequences should they conspire again.

Market order

The FTC expects these measures to bring order back to the market and ‘positively’ affect companies in dealing with currency derivatives for risk management through fair competition. At the same time, the Financial Supervisory Service (FSS) in Korea has also been investigating a number of cases involving investment banks' price rigging of forex derivatives contracts separately. This is  part of a response by global regulators to look into the implications of several investment banks including JP Morgan Chase, HSBC and Citibank, also known as ‘the Cartel.’