Swiss watchdog opens bank probe into precious metal collusion

ZURICH/LONDON - The Swiss competition watchdog has launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing.

Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks.

Even though the market has moved to reform the process of deciding on its price benchmarks, accusations of manipulation have refused to go away.

Gold prices have also shed some 9 per cent in the last two years as investors lose faith in its status as a store of value. Switzerland's WEKO said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.

"It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned," WEKO said in a statement.

A WEKO spokesman said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules.

The banks face financial penalties if WEKO finds them guilty of wrongdoing, the spokesman said, though he declined to comment on the size of any possible fine.

WEKO could add more banks to its investigation if it finds cause for suspicion, the spokesman said. The move comes a month after press reports that the European Union's competition regulator was investigating anticompetitive behaviour in precious metals spot trading, and follows news of a US probe by the Department of Justice (DoJ) and the Commodity Futures Trading Commission earlier this year.

US authorities are investigating at least 10 major banks for possible rigging of precious metals markets, according to reports. HSBC and Barclays said earlier this year that they were cooperating with the investigation.

Aside from regulatory probes, a number of lawsuits have also been filed in US courts alleging a conspiracy to manipulate precious metals prices.

Commenting on the WEKO probe, a Julius Baer spokesman said the bank was cooperating with authorities. In a statement, Deutsche Bank said it was cooperating with requests for information from "certain regulatory authorities"over precious metal benchmarks but declined to comment further.

Representatives for UBS, Barclays, Morgan Stanley and HSBC declined to comment. Mitsui was not immediately available for comment.


Scrutiny of precious metals pricing ramped up with the LIBOR scandal in foreign exchange markets. In May, four major banks pleaded guilty to trying to manipulate forex rates and, with two others, were fined nearly US$6 billion (S$8.56 billion) in another settlement in a global investigation into the US$5 trillion-a-day market.

A push for more transparency in precious metals saw banks last year abandon existing benchmark prices, including the century-old "gold fix", which had been set twice a day via a telephone auction, in favour of a physically settled electronic system.

The benchmarks were used by miners, refiners, traders and end-users to price gold and silver, as well as platinum and palladium, which are chiefly used in autocatalysts.

Last year Swiss financial regulator FINMA said it had found a "clear attempt" to manipulate precious metals price benchmarks during a cross-market investigation into trading at UBS.

As part of ongoing obligations imposed by FINMA, UBS is seeking to automate at least 95 per cent of its global foreign exchange and precious metals trading by the end of 2016.

The UK Financial Conduct Authority (FCA) last year fined Barclays 26 million pounds (S$56 million) for failures in internal controls that allowed a trader to manipulate how gold prices were set.

Germany's Bafin has also investigated the gold market, but said earlier this year that it had found no signs of benchmark price manipulation.

The impact of the probes on wider precious metals trading was likely to be muted, according to Brian Lucey, professor of finance at the School of Business, Trinity College Dublin.

"The question is not if individuals, or groups of individuals are collaborating to rig the game for themselves, the question is if this has any material effect," he said.

"I'm not convinced collusive behaviour will have a meaningful effect micro-economically to the structure of gold trading around the world."