Den Schluss schmeissen

Foreigner German for “banging the close.”

Banging the close was one of two unethical things several currency market traders said they could do to game exchange rates because a handful of large banks controlled half the market, according to a June 2013 article in FAZ.net. Traders at the big banks could input trades before and after a huge trade’s 60-second window and have an effect on the rate, despite the fact that “The benchmark exchange rates are based on actual transactions and not on banks’ estimates like the L.I.B.O.R. reference rate is.” The second thing was to arrange their day’s work around a pending large trade; they would get a poorer exchange rate for the client in order to buy back her sold currency more cheaply than would have been the case.

The June 2013 article also said authorities were investigating benchmark manipulation in crude oil and swap markets.

(Dane   SHLOOSS   shmigh sen.)

Cuando bandoleaba

“When I was a bandit,” according to Eric Hobsbawm*. These “violent popular heroes” in “individual or minority rebellion within peasant societies” may have been aspirational to crooked central bankers.

Bankers at England’s central bank may have been among those manipulating currency exchange rates to line their own pockets, said Süddeutsche.de. Several members of the “Chief Dealers Subgroup” of the Bank of England’s “London Foreign Exchange Joint Standing Committee” were among >20 currency dealers recently suspended from large banks around the world. The dealers have been accused of using chatrooms and nicknames such as “The Cartell” or “The Bandits Club” to discuss prices for currency markets.

Süddeutsche Zeitung said there’s gossip that UBS, which also suspended a currency dealer who was a member of the subgroup, might again seek immunity in return for testimony in a potential trial, as it did in the L.I.B.O.R. scandal.

“What’s hanging in the air is whether this central bank knew about the manipulation for years and whether its employees were involved in the affair,” wrote Süddeutsche.de, saying [corruption] at a central bank would add “a new dimension” to recent banking scandals. The Bank of England published minutes of the subgroup’s meetings from 2005 to 2013 this week that are said to be of interest in possible shenanigans. The subgroup last met in February 2013.

In the U.K., the Bank of England acts as a regulator to help ensure financial stability, Süddeutsche.de said. The government body investigating possible currency market manipulation is Britain’s Financial Conduct Authority.

“Currency markets,” said a Süddeutsche.de op-ed, “are the world’s biggest financial market, with a daily turnover of US$5.3 trillion. …London is the center, [where] about half the world’s currency business is transacted. That’s also where the London Fixing is calculated. It is a fixed exchange rate between currencies, the most important one is published every day at 4 p.m. The business is controlled by a few major banks.” Investigations of about 15 banks for currency manipulation began in fall 2013, but the Bank of England was supposedly warned about a potential problem in 2006.

* Eric Hobsbawm’s book Bandits describes three subtypes: noble robbers like Robin Hood, avengers like the Brazilian cangaçeiro Lampiao and haiduks or “primitive resistance fighters.”

L.I.B.O.R.-Klagen

L.I.B.O.R. lawsuits.

The U.S. company Fannie Mae has filed complaints seeking about half a billion euros in damages from multiple banks around the world for L.I.B.O.R. benchmark interest rate manipulation. Deutsche Bank is one of the defendants.

Update on 01 Nov 2013: ZDF heute journal financial correspondent Frank Bethmann said the many banks found to have participated in L.I.B.O.R. manipulation have been fined about 2.7 billion euros total by the world’s bank oversight authorities alone so far. Now more and more company lawsuits keep “fluttering in,” making them possibly the costlier threat. He said Deutsche Bank had now set aside 4.1 billion euros for legal fees. “But that shirt could prove too short as well, particularly in the U.S.A.”

Update on 06 Nov 2013: FAZ.net reported that insiders told Reuters news agency that before 2014 the E.U. competition commissioner wants to fine six banks a total of 1.5 billion euros for L.I.B.O.R. benchmark manipulation, including Barclays, Royal Bank of Scotland (R.B.S.), the Dutch Rabobank (“genossenschaftlich” bank meaning it started life as a mutual?), and the “broker” I.C.A.P. The Swiss bank U.B.S. will be excused from this fine—said to be the largest bank fine in E.U. history—because they were the first to testify. These six banks admitted this particular wrongdoing and as a result the E.U. said it will reduce those fines by 10%.

This set of fines is for the yen L.I.B.O.R. manipulation subscandal of the L.I.B.O.R. manipulation scandal. Deutsche Bank may be facing additional U.K. and U.S. fines for U.S. dollar L.I.B.O.R. manipulation.

Financial regulators around the world are also investigating more than a dozen banks for Eur.I.B.O.R. benchmark manipulation. On 06 Nov 2013 FAZ.net reported that insiders said the E.U. Commission was negotiating fines to half a dozen banks for that as well, including Deutsche Bank and possibly Royal Bank of Scotland and Société Générale. FAZ.net reported the U.K.’s Financial Times reported each of these six will have to pay up to 800 million euros for that set of fines. And that Bloomberg.com reported the British bank H.B.S.C. had withdrawn from those fine negotiations, giving up the proffered 10% fine rebate for admitting wrongdoing.

German Wikipedia said the Eur.I.B.O.R. is set on the basis of data submitted by 32 European “credit institutions,” minus the top 15% and bottom 15% outliers, to the “information agency” Thomson Reuters. The Eur.I.B.O.R. is then published by Reuters.

English Wikipedia said the Eur.I.B.O.R. was created by combining “domestic” benchmark rates, such as from Paris, Frankfurt and Helsinki, in 1999. It said there is still a separate Euro L.I.B.O.R. set in London, based on data from 16 banks.

(LEE boar CLOG en.)

Dividendenstripping

Dividend stripping.” A tax avoidance scheme the HypoVereinsBank is accused of, wherein they allegedly transferred customers’ stocks back and forth between German and foreign banks until it was unclear whether the Kapitalertragssteuer had been paid and then claimed more capital gains tax credits than were owed. Reuters and the Süddeutsche Zeitung reported that a single Frankfurt investor working with HVB and other banks was told he owed 124 million euros in tax for 2006–08 after the IRS-equivalent refused to accept his capital gains tax break from the scheme; he has been fighting in court since 2011 to get HVB to pay the tax bill. HVB and this investor split the profits 65% HVB, 35% investor. Wikipedia says dividend stripping lost its tax-law basis in 2000, Spiegel says it hasn’t been accepted by German tax authorities since 2007, and Süddeutsche Zeitung says since 2012.

Weird story about the HypoVereinsBank in Spiegel-Online on 30 Nov 2012: A guy accused his ex-wife and other HVB employees of large-scale tax avoidance schemes that moved money to Switzerland, was declared non compos mentis by the Bavarian justice system and has been locked up in a mental institution ever since (2006). The man probably was violent, but he may have been correct about the tax avoidance. He cited names and numbers when he blew the whistle to the Bavarian tax authority, but a judge who was not involved in that case called the tax office and told them not to investigate the bank because the whistleblower was crazy. The institutionalized whistleblower’s case was re-opened in 2013. He was set free  in the summer of 2013, after seven years of confinement. Laws committing people to mental institutions and keeping them there are going to be reformed as a result of his case. This started with an 05 Sep 2013 decision by the supreme court in Karlsruhe, the Bundesverfassungsgericht, which prioritized a review of the whistleblower’s case and announced failures of the various state courts and criteria that need to be met in future.

The Frankfurt district attorney’s HVB razzia last week found a trail leading to “a Swiss private bank.” Süddeutsche Zeitung says it is thought that Swiss banks will be a very fruitful place to investigate this German tax scandal. Deutsche Bank and UBS are now implicated as well.

Update on 16 Dec 2013: HSH Nordbank has been accused of dividend stripping.

(Dee veed END en shtrrrip pink.)

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