Citigroup & JPMorgan: Wrapped Up in Another International Investigation

US Money

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You know what they say: another day, another allegation of institutional corruption at the world’s largest financial institutions. People with knowledge of the matter tell Bloomberg Businessweek that Citigroup (NYSE:C), JPMorgan (NYSE:JPM), and Standard Chartered have placed top currency dealers on leave after regulators began probing the banks over possible manipulation of foreign exchange rates.

Bloomberg’s sources report that Citigroup head of European spot trading Rohan Ramchandani and JPMorgan chief dealer Richard Usher were put on leave by mutual agreement this week and last, as regulators examine the issue. Regulators are reportedly focusing on an instant messaging service used by the two men and dealers at at least three other major banks: Barclays (NYSE:BCS), Royal Bank of Scotland Group (NYSE:RBS), and UBS AG (NYSE:UBS).

Between them, the five firms account for about 47 percent of the $5.3 trillion daily foreign exchange market, and regulators from England and Switzerland are investigating whether the dealers used the communication network to manipulate the day-end exchange rates that are at the core of the market. If the dealers colluded with one another to push rates in a favorable direction, regulatory action could be taken against the individuals and/or the banks at which they work.

Citigroup and JPMorgan have been fairly quiet on the issue. JPMorgan is America’s largest bank by assets, but Citigroup may have more exposure to the situation. Citigroup is America’s third-largest bank by assets but it has the most international exposure and is the second-biggest currency trader. The firm uses its foreign exchange desk to compliment payment and cash management services.

The Financial Conduct Authority, a UK regulatory body, confirmed that investigations are taking place, but it’s unclear what the exact nature of the investigations are. Regulators from The U.S. and Hong Kong are also reportedly getting involved.

In its most recent quarterly filing with the Securities and Exchange Commission, Citigroup reported that, “Government agencies in the U.S. and other jurisdictions are conducting investigations or making inquiries regarding trading on the foreign exchange markets. Citigroup has received requests for information and is cooperating with the investigations and inquiries and responding to the requests.” Shares of Citigroup were up fractionally in afternoon trading on Friday.

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