DeFi May Not Herald Independence Day From Traditional Banking
PYMNTS, 05 July 2021
Independence Day weekend brings to mind freedom, of course. And before too long, we may have independence from the banks, from the third parties, and from the financial system itself. Or maybe not.
The promise of decentralized finance (DeFi) is that the advent of cryptocurrencies, and perhaps more significantly, blockchain, will eliminate the reliance on the traditional players in financial services. Continue reading “Article: DeFi May Not Herald Independence Day From Traditional Banking”
Hedge Funds Make Biggest Short Bet on Junk Bonds Since 2008
Laura Benitez and Tasos Vossos, 07 May 2021
Hedge funds have accumulated the biggest short position on junk bonds since 2008 in another sign that investors are lining up to bet against frothy debt markets. About $55 billion of global high-yield bonds has been sold short, according to data from IHS Markit Ltd. That’s up from $35 billion at the start of the year.
The heady mix of rich valuations and willingness of bond bulls to throw cash at ever-riskier companies is raising alarm bells that credit markets are looking increasingly stretched. Add in the threat of rising interest rates, and there’s plenty of reason for some investors to be nervous. Continue reading “Article: Hedge Funds Make Biggest Short Bet on Junk Bonds Since 2008”
Bank of England sees potential risks from cloud data providers
Reuters, 21 April 2021
The Bank of England might strengthen its controls on cloud data providers and other technology firms to counter possible risks to the stability of the financial system from the rise of fintech, Deputy Governor Dave Ramsden said.
The Bank of England (BoE) has expressed concerns before about the reliance by financial firms, especially fintech startups, on third-party technology companies for key parts of their operations, and Ramsden said this scrutiny would intensify. Continue reading “Article: Bank of England sees potential risks from cloud data providers”
UK central bank drawn into market manipulation scandal
Associated Press, 10 April 2017
LONDON – British politicians are seeking an investigation into allegations that the Bank of England was also involved in manipulating a key market interest rate during the financial crisis.
The BBC says it has a recording from 2008 between officials at Barclays bank that indicates the Bank of England was trying to influence the interest rate, called Libor. Several banks have been fined billions for tampering with the interest rate, which is used to price services like loans globally.
Labour party lawmaker John McDonnell says “this is an extremely serious revelation that contradicts past assurances about the role of the Bank of England in the Libor scandal.”
The central bank told the BBC that Libor was not regulated at the time and that it has been helping in past investigations.
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DEUTSCHE BANK ADMITS BIG BANKS RIGGED GOLD AND SILVER MARKETS
Gog Magog War, 26 April 2016
Recently, a European mega-bank, Deutsche Bank, admitted that it cooperated with other global mega banks to manipulate the gold and silver markets (first link). This story deserves far more coverage and analysis than it has been given in the establishment media. As one reads the links, it is quite evident that the mega-banks rigged the gold and silver markets to suppress the prices of both metals. However, in a conspiracy to manipulate the prices either up or down in the short term, the banking insiders could reap huge illegal profits via such insider trading actions. Continue reading “Article: DEUTSCHE BANK ADMITS BIG BANKS RIGGED GOLD AND SILVER MARKETS”
UK banks may face another £40 billion in fines for misconduct, Bank of England warns
Nick Goodway, 02 December 2015
British banks may see their bill for past misconduct rise by another £40 billion, the Bank of England has warned.
The figure, which was included in the central bank’s stress test results on Tuesday, is virtually double what banks have already set aside to cover the cost of historic crimes and misdemeanours.
The Bank explained that while the extra £40 billion was “not a central projection for future misconduct costs”, it had been arrived at using the best available information.
It said: “Bank staff have generated these ‘stressed’ estimates for additional misconduct costs drawing on information provided by participating banks as well as other sources – including, for example, public reports of legal proceedings involving potential bank misconduct issues.”
The stress test assumed that £30 billion of the extra misconduct charges would fall in the first two years of the five-year scenario played out in the simulation.
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Common currency: a forex scandal that epitomises the blindness in the banking crisis
Andre Spicer, 16 November 2014
The biggest open secret in the financial world has been confirmed. Regulators in the UK, the US and Switzerland have announced massive fines for some of the world’s largest banks for a manipulation of global currency markets that in its callous ubiquity says so much about the banking behaviours that sparked the global financial crisis.
Fines levied by the UK regulator add up to £1.1 billion. The US regulator announced fines of $1.4 billion. Banks hit by these fines include UBS, Citi, JP Morgan, HSBC and RBS. Barclays is yet to come to a settlement on the back of the investigations.
The probe uncovered individuals traders within large banks who were working together in trading clubs which had names you would expect from the “ruthless narcissists” on BBC TV show, The Apprentice. These included “the players”, “the 3 musketeers” and “1 team, 1 dream”.
These clubs worked together to influence the WM Reuters 4pm fix – essentially the official number used to fix currency rates. It shapes everything from how much we pay for currency when we go overseas to how much our pension fund pays when it wants to buy into an offshore investment. This is one of the core numbers in global finance.
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Regulators fine global banks $4.3 billion in currency investigation
Kirstin Ridley, Joshua Franklin, Aruna Viswanatha, 12 November 2014
Regulators fined six major banks a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market, following a yearlong global investigation.
HSBC Holdings Plc, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co, Citigroup Inc, UBS AG and Bank of America Corp all faced penalties resulting from the inquiry, which has put the largely unregulated $5-trillion-a-day market on a tighter leash, accelerated the push to automate trading and ensnared the Bank of England.
Authorities accused dealers of sharing confidential information about client orders and coordinating trades to boost their own profits. The foreign exchange benchmark they allegedly manipulated is used by asset managers and corporate treasurers to value their holdings.
Dealers used code names to identify clients without naming them and swapped information in online chatrooms with pseudonyms such as “the players”, “the 3 musketeers” and “1 team, 1 dream.” Those who were not involved were belittled, and traders used obscene language to congratulate themselves on quick profits made from their scams, authorities said.
Wednesday’s fines bring total penalties for benchmark manipulation to more than $10 billion over two years. Britain’s Financial Conduct Authority levied the biggest penalty in the history of the City of London, $1.77 billion, against five of the lenders.
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Osborne to target foreign exchange manipulation in City clean-up
Kamal Ahmed, 02 June 2014
The obscure and complicated foreign exchange market is to be the next target of Treasury action, I have been told.
The chancellor is working with Whitehall officials and the international Financial Stability Board (FSB) on new regulations which will be imposed on the market. At the moment, foreign exchange (known in City shorthand as “forex”) is largely unregulated and left to the bank traders who execute deals on behalf of global companies. Companies use forex deals to move money between different currencies and a large part of the market is dealt through London.
One senior official I have spoken to agreed that the public would be “very surprised” that such a major market was clearly open to abuse. The Treasury is likely to announce a set of measures to “clean up the market”, probably in the next fortnight.
The prices in forex are set by traders who are doing the deals. Traders are able to pick a selection of the trades they have been asked to execute, meaning they can choose those most advantageous to their bank. The prices are set at the 4pm “fix”, a daily City benchmark against which currencies are priced. I have written a short “How It Works” at the end of this blog on the allegation that forex is manipulated.
Regulators around the world including the Financial Conduct Authority (FCA) in London and the US Department of Justice are investigating allegations of forex manipulation. It has been reported that at least 15 banks are involved and nine are thought to have suspended or fired traders. No allegations have been proved and no admissions of fault made.
Martin Wheatley, the head of the FCA, said the allegations, if substantiated, could be “every bit as bad as Libor”, referring to the revelations three years ago that the market which governs how banks lend to each other was regularly fixed.
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Former Royal Bank of Scotland trader linked to currency market fixing
Jill Treanor, 12 OCtober 2013
Electronic messages that Royal Bank of Scotland handed to the City regulator in connection with potential manipulation of the £3tn-a day currency market are reported to have been sent by the bailed-out bank’s former trader Richard Usher.
The messages are said to be among those handed to the Financial Conduct Authority (FCA) by the bank, which is 81% owned by the taxpayer.
Usher, who could not be reached for comment, is now the head of spot trading at JP Morgan in London. He has been listed as a member of a Bank of England committee that polices a voluntary code of group practice for the markets.
The regulatory review by the FCA, which has not yet escalated its inquiries into a formal investigation, implies no wrongdoing by Usher, according to the Bloomberg news agency, which revealed his identity.
The analysis of the electronic messages is the latest move by regulators to test the integrity of benchmarks used to price financial products in the light of the Libor-rigging scandal as well as manipulation of gas prices. The investigation was triggered by reports in the Guardian last year.
The FCA said in June it was looking at foreign exchange markets after Bloomberg reported that traders at some banks were sharing information about their positions through instant messages. These were said to be a way to manipulate an index compiled by WM/Reuters and based on prices of currencies for a 60-second period.
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