FOREX traders at the centre of a criminal investigation

A criminal investigation has been commenced by the Serious Fraud Office following alleged fraudulent conduct by traders dealing in foreign exchange currencies. The criminal investigation is set to examine the actions of several traders employed at top city banks who have allegedly colluded to fix exchange rates in order to profit from the lucrative £3 trillion a day market.

The SFO were unwilling to name and shame at such an early stage, however it is understood that the collusion spread across top banks and several financial institutions. Regulators worldwide among which are Hong Kong, the US, Switzerland and the UK authorities have taken steps by digging into allegations of exchange rate fixing. However, the SFO marks the first official criminal investigation to take place. 

London is said to be the capital of the foreign exchange rate market where somewhere around 40% of trading takes place. It is in the capital where several traders are facing allegations of collusion following discoveries of online chatroom messages which have discussed business affairs. The Financial Conduct Authority, which is the British financial regulator begun an in depth review of the foreign exchange market in 2013.

The matter was also taken very seriously by the Bank of England who appointed Lord Grabiner QC to investigate whether some of its own members were involved in the currency manipulation which is said to have taken place in the years between 2005 and 2013. To date, over 25 traders some of which work in the world’s biggest banking institutions have been put on suspension or have been fired worldwide as the regulators continue their investigations.

There are large concerns looming especially over the benchmark which is popularly known as the 4pm fix which is used among insurance and pension funds in order to determine what they should pay for foreign currencies. This London fix was established in 1994 and is run in partnership between Reuters and WM. If however, the fix is discovered to have been manipulated then it is almost certain that this would have cost British businesses and investors millions of pounds which in turn would have been pocketed by the fixers.

Some of the world’s biggest banks are concerned that this scandal could likely escalate to the level of the Libor crisis which resolved to multi million pound fines for Britain’s lagers financial institutions. The several banks involved in the Libor rigging scandal have shared fines which combined total to almost £3bn.

PPI Claim Facts You should be Aware of

Mis-selling of PPI policies started as early as 1990s. The PPI companies were fined from 2006, but a major spin in the situation was seen only in 2011.  PPI complaints can be made at any time, though there are certain guidelines that will help in getting the claims in an easy manner as possible.

  • If your insurance has been active for the past six years, it would be easier to claim.
  • For a policy that is of an older duration, but in an active stage, or has expired within the past six years, you can still get a PPI refund. For instance, a 12 year old policy that has been paid off within the past six years is eligible for a refund.
  • In case of your policy ending six years back, PPI guide states that even if the banks do not have the concerned paperwork, if you have got the relevant documents, you can still make a complaint. However, the success rate is low in such cases.

Amount You Can Claim

Calculating the exact amount is difficult.  A PPI calculator can assist in estimating the precise amount you will get. The calculation is done by taking into account the time at which the policy was taken, the premium type, and whether you can claim the entire amount or only part of the original amount. Working out the value of the monthly loan payment can be done by entering in the amount of the loan and doing a comparison of the amount you had paid.

If you have ascertained your eligibility for a claim, you can approach the policy provider directly or march through PPI claim agencies. Ensure you go to a reputable one that is regulated by the Ministry of Justice such as The PPI Claims Advice Line – their website is www.PPIClaimsAdviceLine.org.uk.  There are PPI template letters available online which aid in entering the relevant details so that your PPI claims are properly addressed in order for you to enjoy a favourable result.

EUROZONE SLOWS TO A SNAIL’S PACE

The Eurozone economy has posted appalling growth figures for the months July to September with a growth of just 0.1% which is a decrease of 0.2% from the previous three months to that. This poor figures has marked only the second month which the Eurozone has posted a positive number, prior to which was an 18 month long recession which saw trade in the euro are contract month on month. The figure as well as showing further negativity, reveals the sensitivity of the recovery as well as the length of time it will take for the economic trade block to fully recover.

The European economy as a whole is taking a lot longer that expected to bounce back from the financial crisis in comparison to the other regions which suffered from the crash of 2008. With the Euro area having debt problems which bare similarities to those of the United Kingdom and the United States of America, for many of the Member States the debt level has a more political importance than its financial meaning.

Those less powerful members of the trade block have been bailed on unfavourable terms with conditions which lead to government cuts in spending with the overall objective to reduce the country’s debts. The implementation of such money saving policies have adversely affected voters who have been the victims of reduction in wages, an increase in taxes as well as job-cuts and changes to the provision of public services. The economic prospects for the Eurozone appear negative for the near future according to several economists who with high unemployment and a decrease in overall living standards cannot see now the economy can be driven to progression.

Nevertheless, a somewhat optimistic projection has been made for next year by the European Commission who predict at 1.1% growth and a progression of 1.7% in 2015. The US who are alike dealing with major government debt issues are however better at handling the economy with a growth rate for this year so far being 2.8% in comparison to the dismal 0.4% figure of the Eurozone.

No positives can be found either within Europe’s strongest and most influential countries, that of France and Germany. The growth of the German economy in the third quarter was down from 0.7% in the previous to 0.3% whereas France displayed a yet disappointing -0.1% which is identical to the third most important member state’s economy, that of Italy.

 

Restricting Speculative Investments: The Volcker Rule

The Volcker Rule forms a key part of the Dodd-Frank Wall Street Reform and Consumer Act – specifically section 619 – aiming to restrict banks in the United States from making speculative investments that will not, and do not, benefit their customers.

Though the Dodd-Frank act is already law, the Rule itself is set to come into play in July of 2014 (the Act allows for a two year conformance period), having been the centre of regulatory debates since it was first proposed, and will affect every US federally insured depository institution. It will also affect any company that controls an insured depository institution (IDI). Any private investment funds dealing with the affected banks will also be subject to the rulings.

What does the Volcker Rule do?

The Volcker Rule aims to prohibit banks from engaging in what it terms “proprietary trading” – which is, in the words of the Rule itself, defined as: “engaging as principal for the trading account of the covered banking entity in any purchase or sale of one or more covered financial positions.  Proprietary trading does not include acting solely as agent, broker, or custodian for an affiliated third party.”

The Rule does not stop the banks from trading completely, but it tightens the controls on such activity and requires stronger documentation. It will be overseen and implemented by five separate government entities: the Federal Reserve, the U.S. Securities and Exchange Commission (SEC), U.S. Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC).

Who will the Volcker Rule affect?

Although the rule primarily bounds only banking institutions in the US, all global banks will likely be subject to Volcker, as any party to a trade that is in the US will be included in the agreement. This means any affiliates of US banks, including overseas bank branches, as well as any foreign banks with operations in the States, will be affected.

Non-banking financial institutions like insurance companies and hedge funds are not affected, and only the larger investment banks – such as Morgan Stanley, who agreed during the financial crisis to become banking institutions – will come under the remit of the Rule.

Ensuring conformity

Any organisations that are affected by the Rule will need to establish a compliance program to address their conformity, and meeting these standards will not be easy for many more complex institutions. Distinguishing market-making from proprietary trading, which is restricted by the Volcker Rule, requires regulators to apply five factors: risk management, source of revenues, revenue relative to risk, customer facing activity and payment of fees and commissions.

Institutions have two years from the date of Dodd-Frank’s enactment, giving a final deadline for compliance of July 21st 2014. During this time, they must perform four key duties:

- Prepare for full compliance in 2014

- Put together a detailed conformance plan

- Show a “good faith” effort to achieve compliance during this period

- Prepare for possible record-keeping and reporting requirements that federal agencies may impose before the 2014 implementation

Tools such as the London Stock Exchange’s UnaVista can help with conformance by providing data consolidation, regulatory reporting, reconciliation and advice for any one affected by these and similar legislations.

Rapid Growth of China’s Economy

As China’s economic importance has grown, so has attention to the structure and health of the economy.

China is the world’s second largest economy by nominal GDP and by purchasing power party after the United States. It is the world’s fastest-growing major economy, with growth rates averaging 10% over the past 30 years.China is also the largest exporter and second largest importer of goods in the world. On a per capita income basis, China ranked 90th by nominal GDP and 91st by GDP (PPP) in 2011, according to the International Monetary Fund (IMF).

“The country’s gross domestic product rose by 7.9% from a year earlier in the fourth quarter”, the National Bureau of Statistics said Friday.That was up from 7.4% growth in the third quarter and slightly above expectations for a 7.8% rise, according to the median forecast in an earlier Wall Street Journal poll of 17 economists.

It was Xi Jinping’s accession to power that has raised hopes on China to restart economic reforms.In  2012,some Analysts estimated that bank loans will fall to their lowest level as a share of total funding in the economy, to around 55%.This is not because capital is drying up in China, total funding for the economy is up over 20% this year and is set to exceed an incredible 30% of GDP for the fourth year in a row.

However, the state-owned banks are the biggest buyers in the bond market. The most important thing to understand about China’s a financial market is that the big five state banks is nearly the only source of capital, simply because they control 70% of all retail deposits.These banks hold over 60% of all outstanding bonds, including government, policy-bank and corporate bonds. Other state-owned entities hold a further 30%.

China’s economic growth accelerated in the fourth quarter of 2012, confirming a rebound for the world’s second-largest economy after more than a two-year slowdown.