LONDON â€" The Swiss bank UBS said on Friday that it was conducting an internal review of its precious metals business amid expanding regulatory investigations into potential manipulation of interest rates and the price of commodities and currencies.
In its annual report released on Friday, UBS said that it had been conducting a review of its foreign exchange operations, including its precious metals business. The bank said it was cooperating with regulators, noting in its review that “a number of authorities also are reportedly investigating potential manipulation of precious metal prices.â€
On Friday as well, Hong Kong’s banking regulator found that traders at UBS tried to rig the Hong Kong Interbank Offered Rate over a four-year period, but ultimately had no impact on how the local benchmark interest rate was set. As a result, the regulator did not fine the bank.
Regulators in Britain and Germany are all looking at the whether benchmark rates for gold and silver prices may have been manipulated. As the scrutiny has mounted, banks have been scaling back or leaving parts of their commodities businesses.
The Financial Conduct Authority of Britain began looking at other benchmark rates, including for gold and silver, as part of an outgrowth of its investigation of rigging of the London interbank offered rate, or Libor, and other global interest rate benchmarks, according to a person familiar with the matter.
The Federal Financial Supervisory Authority of Germany, or BaFin, has acknowledged that it is looking at the trading of precious metals as part of its inquiry into potential manipulation of the currency markets.
More than 20 traders have been suspended or fired as part of internal investigations at some of the world’s largest banks into potential manipulation of currency markets. But no suspensions have been emerged regarding precious metals trading.
The process of setting the benchmark price for gold in London dates to 1919. It is set twice a day by five firms that serve as market makers, according to the London Bullion Market Association.
Barclays, Société Générale, Deutsche Bank, Scotiabank and HSBC are the member firms that help set the daily benchmark prices for gold in London.
In January, Deutsche Bank said that it planned to stop participating in the setting of gold and silver benchmarks as it scaled back its commodities business.
Deutsche Bank, Morgan Stanley and Bank of America Merrill Lynch have all sold or closed parts of their commodities operations in recent months.
JPMorgan Chase announced plans in July to possibly sell or spin off its physical commodities business. The Mercuria Energy Group, a fast-growing energy and commodities trading company, entered into exclusive talks to acquire the business last month, according to a person familiar with the discussions.
The manipulation of Libor and other benchmark interest rates continues to cast a black mark on the industry.
On Friday, the Hong Kong Monetary Authority said that after an investigation of nine banks that were part of the local consortium making daily submissions to determine the Hong Kong Interbank Offered Rate â€" which is used as a benchmark to price corporate loans, household mortgages and other types of debt â€" only UBS was found to have tried to manipulate the rate.
The authority said it discovered about 100 internal chat messages from September 2006 to June 2009 sent by UBS traders that tried to rig the interest rate. The messages were sent to the employee who was responsible for making submissions on the bank’s behalf.
But only about a third of these rate-rigging requests affected the submissions that UBS actually made, the regulator found. Moreover, because UBS acted alone and was not conspiring with other banks to rig rates â€" a situation that proved to be the case in other financial markets, like London â€" the monetary authority found that UBS’s actions ultimately had no impact on how the Hong Kong rate was set each day.
“The bank has cooperated with the H.K.M.A.’s investigation and agreed to comply with the requirements by taking appropriate follow-up actions promptly,†the regulator said Friday in a statement. “The case is a clear reminder to all banks of their duty to uphold robust internal controls and governance and to take adequate measures to prevent and detect internal improprieties.â€
In 2012, UBS was fined $1.5 billion by American and British regulators over rate-rigging. In addition, the Swiss bank pleaded guilty to criminal charges in the United States over rate-rigging carried out by its Japanese unit.
