Brazilian banks negotiate agreements over currency probe
Brazilian antitrust body Cade is negotiating agreements with banks that are being investigated for allegedly manipulating exchange rates from 2009-11, reported newspaper Valor Econômico.
The negotiation process will involve two phases. The first will verify the evidence each bank has in order to aid Cade's investigation, and the second addresses with the penalties that will be paid by each institution in order to close the case.
There are 15 financial institutions under investigation. Standard Investment Bank, Bank of Tokyo-Mitsubishi UFJ, Barclays, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JP Morgan Chase, Bank of America Merrill Lynch, Morgan Stanley, Nomura, Royal Bank of Canada (RBC), Royal Bank of Scotland (RBS), Standard Chartered and UBS.
UBS signed a leniency agreement with the antitrust agency in July, after giving evidence that has freed it from punishment. The other banks could be ordered to pay fines ranging from 0.1% to 20% of their revenues in the areas that are being investigated. Some 30 individuals are also suspected of involvement in the illicit activity.
Cade has received transcripts of conversations between Brazilian operators abroad that indicated that they were manipulating exchange rates to charge clients and companies higher rates.
On October 28, 2009, an RBC executive and a colleague from Barclays discussed the matter in an email exchange.
"Everybody agrees in not accepting a local broker?" asked the RBC broker.
"Yes, the less competition, the better," replied the Barclay's executive.
Between December 2008 and October 2009 the US dollar went from 2.5 reais to 1.70 reais. On the day of the email conversation, however, the dollar closed with a 0.6% gain over the real.
If the banks are found to have engaged in illegal activities, companies that suffered losses because of the higher exchange rates could go to court and seek damages against the financial institutions.
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