Taiwan penalized Deutsche Bank AG and three other foreign lenders after a probe into speculation on the surging local currency last year involving grain companies.
Deutsche Bank’s trading approvals for Taiwan dollar deliverable forwards and non-deliverable forwards will be revoked, and it will be banned from engaging in transactions of foreign exchange derivatives for two years, the island’s central bank said in a statement Sunday.
ING Groep NV and Australia & New Zealand Banking Group Ltd. won’t be allowed to engage in Taiwan dollar deliverable forwards and non-deliverable forwards trading for nine months, while Citigroup Inc. is banned from Taiwan dollar deliverable forwards trading for two months, the central bank said. The penalties imposed on the local units will take effect on Monday.
The banks were notified of the punishments on Friday. Trades made before the notice won’t be affected, the central bank said.
Citigroup declined to comment. Deutsche Bank, ING and ANZ didn’t immediately respond to calls seeking comment outside of business hours.
Eight of Asia’s leading food traders, with the help of six overseas banks, built a combined $11 billion in their Taiwan dollar deliverable forwards positions as of the end of July, the central bank said last month. The positions were based on overseas physical grain trades deliberately transacted via their Taiwan units to speculate on the local currency, affecting market stability, it said.
Cargill Inc. and Louis Dreyfus Co. were involved, along with Deutsche Bank, Citigroup, JPMorgan Chase & Co. and Standard Chartered Plc among others, Bloomberg News reported in January, citing people with knowledge of the matter. At least some of the trades were specifically designed to profit from the rising Taiwan dollar, the people familiar said.
The island’s dollar has strengthened almost 7% against the U.S. dollar over the past 12 months, among the region’s top performers, according to Bloomberg data.
The central bank settled with two lenders in November, it said Sunday, without identifying them. The six banks violated rules because the forwards trades had to be made based on their actual needs, the central bank said Sunday.
Deutsche Bank can reapply for the revoked trading approvals in the future depending on improvements, according to Eugene Tsai, the central bank’s director general of the Department of Foreign Exchange.
Taiwan’s central bank tightly regulates how much of its dollars foreign companies can accrue to avoid speculation on the currency. It had said the huge positions the commodity companies built up in deliverable forwards went beyond their actual business needs.
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