German Watchdog Worried Over Scale of Forex Manipulation

By Eyk Henning 

        FRANKFURT--Germany's banking watchdog is concerned about the magnitude of attempted foreign-exchange manipulation at large domestic banks including Deutsche Bank AG and expects to conclude its investigation into possible misconduct by next year.
        The individual cases of attempted currency manipulation are nothing to be "relaxed about," Raimund Roeseler, the head of bank regulation at BaFin, told The Wall Street Journal on Tuesday.
        Mr. Roeseler didn't rule out that the scale of currency manipulation might have a similar magnitude to that of the rigging of the London interbank offered rate, or Libor.
        "We haven't concluded our [currency] investigation so I can't predict [the outcome]," Mr. Roeseler said, adding his authority aims at concluding the probe by the end of next year.
        Deutsche Bank AG and domestic rival Commerzbank AG have both suspended or fired individual traders attempted to manipulate rates in the $5.3 trillion global currency market amid internal investigations of the alleging market rigging and high-profile executive departures. The banks are fully cooperating with authorities, officials have said.
        The upheaval at the banks come as they have faced severe criticism from German regulators which have accused Deutsche Bank of suffering from a a badly broken corporate culture. The German lender unexpectedly announced in June that its co-chief executives, Anshu Jain and Jurgen Fitschen, planned to resign. Deutsche Bank officials have said the resignations weren't the result of regulatory pressure.
        Deutsche Bank may have to pay another hefty fine for the remaining legal issues, according to banking analysts, after Germany's largest lender paid a record $2.5 billion charge to settle British and U.S. allegations its traders rigged Libor.
        Deutsche Bank is still awaiting BaFin's final verdict over Libor, which people familiar with the matter expect to come this fall. Mr. Roeseler declined to comment on whether his authority will push for further consequences.
        In its Libor report sent to Deutsche Bank on May 11, BaFin lambasted half a dozen of current and former executives for failing to stop or tell regulators about years of attempted market manipulation and lashed out at Mr. Jain.
        BaFin partially cleared Mr. Jain in July, saying it no longer suspected that he purposely misled German central-bank officials in a private 2012 query about market manipulation, according to a confidential letter reviewed by The Wall Street Journal. The authority still upholds the other allegations against Mr. Jain, according to the letter.
        Some senior Deutsche Bank officials at the bank have privately complained that regulators have unfairly singled out Mr. Jain.
        Mr. Roeseler rejected the idea of any witch hunt, saying his authority "doesn't accuse Deutsche Bank of witchcraft."
        Still, BaFin has the "impression that banks started probes with the goal to prove their innocence" and too late focused on conducting an unbiased investigation into their role in market manipulation. "They didn't do themselves a favor with that," Mr. Roeseler said.
        (END) Dow Jones Newswires

        August 11, 2015 04:27 ET (08:27 GMT)