LONDON â€" Expect more bad news from banks about accusations of manipulation in the huge foreign exchange market.
Allegations that traders colluded to rig prices in the foreign exchange market “are every bit as bad as they have been with Libor,†Martin Wheatley, the chief executive of the Financial Conduct Authority, said at a parliamentary hearing on Tuesday, referring to the investigation into the manipulation of the London interbank offered rate.
He said that he was surprised by the breadth of the investigation, especially because the foreign exchange market is deep and liquid and “based on real trades.†Like the Libor investigation, he said, the authority is looking at allegations of collusion between individuals and firms using chat rooms and phones to rig prices.
His comments do not bode well for banks, which have paid billions of dollars in fines to settle cases related to money laundering, mortgage-backed securities, the sale of unsuitable insurance products and trading bets that went awry.
On Libor alone, they have paid more than $6 billion, according to Bloomberg. At least 10 people have been charged criminally by the Justice Department in the United States and the Serious Fraud Office in Britain, with more charges expected.
More than a dozen foreign exchange traders at some of the world’s largest banks, including Barclays, Citigroup and JPMorgan Chase, have been placed on leave amid questions about whether they colluded to manipulate benchmark currency rates.
This week, the Lloyds Banking Group became the latest bank to suspend an employee. Martin Chantree, a senior currencies trader, was placed on leave as part of its own internal investigation, according to people briefed on the matter.
Mr. Chantree, who has been with the bank for about nine years, has not been accused of wrongdoing. He could not be immediately reached for comment on Tuesday.
“It is group policy not to comment on individual employees,†Lloyds said in a statement.
Asked by a member of the parliamentary committee whether people could have faith in the benchmark-setting process, Mr. Wheatley said “people won’t trust it because of what they have seen.â€
He said that he expects the foreign exchange investigation to continue into next year. One lawmaker, who said that Britain appeared to be following the lead of the United States on the Libor investigation, asked what role Britain is taking in the currency case.
“We have the lead position,†Mr. Wheatley said.
Chad Bray contributed reporting.
