* Deutsche Bank resigned gold and silver "fix" seats in May
* Bafin starts investigating Deutsche Bank in mid-2013
By Clara Denina
LONDON, June 19 Deutsche Bank is
conducting its own investigation into trading around the setting
of London's daily gold price benchmark, in addition to one being
carried out by Germany's financial watchdog, sources close to
the matter said.
The German bank had been a member of the century-old gold
"fix" - a widely used price set twice a day by five banks in a
conference call - for two decades until May, when it resigned
from the processes for gold and silver.
An internal investigation can be triggered by scrutiny from
external regulators as a bank would need to examine its own
processes to answer questions raised.
Taking early action as a result of an internal probe may
also mitigate the impact of any sanction the regulator imposes.
"The external regulator Bafin visited (Deutsche's London
offices) over a year ago now and looked at the metals business
and all the benchmarking issues. That's when the internal audits
started as well," one source said.
"They (Deutsche Bank) will be thoroughly investigating the
trading activity that has taken place, particularly on binary
In May, Barclays Plc, one of the five banks
involved in the gold fix, was fined 26 million pounds ($43.8
million) by the Financial Authority Conduct for failures in
internal controls that allowed a gold options trader to
manipulate the setting of gold prices.
German regulator Bafin called on banks in 2013 to tighten
controls and processes around price-measuring mechanisms,
including those in precious metals.
"We have been conducting investigations since the middle of
last year," a Bafin spokesman said.
Regulators across Europe and the United States started to
scrutinise benchmarks in several markets at individual banks
after the Libor manipulation case in 2012, for which firms have
been fined billions of dollars.
Deutsche Bank said it is working with regulators on the
their review of the gold and silver benchmarks.
"Certain regulators have been reviewing benchmarks,
including gold and silver. As we have said previously, we are
cooperating with those inquiries," it said in an emailed
Barclays was the first bank to be charged over attempted
manipulation of the London gold "fix". The FCA said that since
the incident, the bank has "enhanced its systems and controls in
relation to the gold fixing."
HSBC and Societe Generale, which are
still involved in setting the price of gold, declined to comment
on whether they are conducting similar internal probes into
trading during the gold fixing process. Bank of Nova Scotia
did not answer requests for comment.
The Gold Fixing Company, which represents banks involved in
the metal's price settlement, is in the middle of a review to
ensure the process complies with benchmark principles outlined
by the International Organisation of Securities Commissions
(IOSCO)- a global umbrella group for market regulators.
A source close to the regulator said that "when banks are
aware of the regulator's enforcement processes, they will
conduct an internal review along formal legal lines."
Over the past three months, U.S.-based investors and traders
have filed more than 20 separate antitrust claims accusing the
five banks of colluding to manipulate the gold price during the
daily setting process. The banks refute the
Deutsche Bank would not be the first investment bank to
carry out an investigation into gold trading. UBS said
in its annual report in March it had widened an internal probe
of its foreign exchange operations to include precious metals
(Reporting By Clara Denina. Additional reporting by Thomas
Atkins in Frankfurt. Editing by Veronica Brown and David Evans)