Swiss authorities probe seven banks for price fixing in metals market
SWISS competition authorities said Monday they were investigating UBS, HSBC, Deutsche Bank and other major banks for suspected price fixing in the trade of precious metals like gold and silver.
The Swiss Competition Commission (COMCO) said it was probing whether seven banks had colluded to manipulate prices in the precious metals market.
The watchdog said in a statement that it had "opened an investigation against two Swiss banks, UBS and Julius Baer, as well as against the foreign financial institutions Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui."
COMCO, which opened a preliminary investigation in February, said it now had indications that the banks had "possibly concluded illegal competition defying deals" in the trade of the precious metals gold, silver, platinum and palladium.
"We think they can have manipulated the price of these precious metals," COMCO deputy chief Patric Ducrey told AFP. The competition authority said it especially suspected the banks had fixed the prices of bid/ask spreads within the market.
Ducrey said the banks had all been informed of the ongoing probe, and that the investigation would likely conclude in 2017.
It is not the first time the role of banks in determining the price of precious metals has been questioned.
In August, the European Commission said it was "currently investigating alleged anti-competitive behaviour in precious metals spot trading in the EEA" (European Economic Area), but provided no further details.
And in February, the US Justice Department reportedly opened its own investigation into possible manipulation of precious metals markets by 10 major international banks: HSBC, Bank of Nova Scotia, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Societe Generale, Standard Bank and UBS.
Goldman Sachs, HSBC, Standard Bank of South Africa and the German chemical group BASF have also been under investigation since last November over a complaint alleging rigging of the prices of platinum and palladium.
Julius Baer, which was not part of the US investigation, told AFP Monday it was aware of the Swiss probe.
"We will constructively cooperate with this investigation," said spokesman Jan Vonder Muehl.
UBS, which did not immediately return requests for comment Monday, said in May it had won immunity from criminal fraud charges in the US probe, after agreeing to provide the Justice Department with information about precious metal transactions.
In its second quarter report, Switzerland's largest bank meanwhile said a number of authorities around the world were reportedly "investigating potential manipulation of precious metals prices."
Precious metals have increasingly come under scrutiny after the discovery that other financial benchmarks have been rigged.
Some of the banks under investigation Monday were already hit by massive fines earlier this year after pleading guilty to US charges of conspiring to rig Libor rates, the global commercial interest rate benchmark used to peg millions of rate-sensitive contracts and loans around the world.
That rate is estimated to underpin some $500 trillion worth of contracts.
The price-setting mechanism to determine benchmark prices for precious metals has also been under reform, amid calls for greater transparency.
Panels of banks have until recently agreed on the reference prices for the precious metals.
But last year, exchange giant CME Group and financial information giant Thomson Reuters began providing an electronic system for setting benchmark silver prices, and the London Metal Exchange (LME) did the same for platinum and palladium.
There are also moves underway to reform the century-old method of gold price "fixing," since the current global benchmark, London's Gold Fix, has already been tainted by a rigging scandal and attacked by critics as old-fashioned.
A new method for setting the gold benchmark price is expected to take effect next March.
Following the news, the two Swiss banks on COMCO's list, UBS and Julius Baer, saw their share prices slump 1.16 and 1.08 percent respectively in late morning trading, as the Swiss stock exchange's main SMI index fell just 0.24 percent.