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 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 percent 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 <UBSG.VX>, Julius Baer
<BAER.VX>, Deutsche Bank <DBKGn.DE>, HSBC <HSBA.L>, Barclays
<BARC.L>, Morgan Stanley <MS.N> and Mitsui <8031.T> 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 behavior in
precious metals spot trading, and follows news of a U.S. probe by
the Department of Justice (DoJ) and the Commodity Futures Trading
Commission earlier this year.
U.S. 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 U.S. 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.
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PRESSURE RISES AFTER LIBOR
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 $6 billion in another settlement in a global investigation
into the $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
favor 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 percent 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 ($43.8 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 behavior will have a meaningful effect
micro-economically to the structure of gold trading around the
world."
(Additional reporting by Kathrin Jones in Frankfurt and by Jan
Harvey, Steve Slater and Clara Denina in London; Editing by Dale
Hudson and Veronica Brown)
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