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Taiwan punishes Deutsche Bank, others in currency speculation case

Sat, February 6, 2021

FILE PHOTO: Staff member stands beside the Taiwanese Central Bank logo in Taipei

TAIPEI (Reuters) - Taiwan's central bank said on Sunday it had banned Deutsche Bank from trading Taiwan dollar deliverable and non-deliverable forwards and suspended it for two years from trading forex derivatives as part of a crackdown on speculation.

The Taiwan dollar is at a more than 23-year-high against the U.S. dollar as the island's trade-dependent economy booms on global demand for its tech products as people work from home. The central bank has been particularly concerned about a case where it said foreign banks helped grain companies engage in currency speculation through deliverable forwards, affecting the stability of Taiwan's foreign exchange market.

Sources told Reuters on Friday that the central bank had sent letters outlining punishments to Deutsche Bank, CitigroupInc, ING and Australia and New Zealand Banking Group Ltd (ANZ) for their involvement.

Apart from the punishment for Deutsche Bank's Taipei branch, the central bank said in statement that ING and ANZ's Taipei offices would not be allowed to trade Taiwan dollar deliverable and non-deliverable forwards for nine months.

Citi's Taipei office would be suspended from trading Taiwan dollar deliverable forwards for two months, it added.

Citi and ANZ declined to comment. Representatives for the other two banks did not immediately respond to a request for comment.

The punishments will come into effect on Monday, the central bank added.

Eugene Tsai, head of the central bank's foreign exchange department, told Reuters that transactions made by the banks in accordance with the rules before Friday had been completed on schedule.

He added that the punishment against Deutsche meant it would not be able to trade forex options or swaps.

The central bank announced its probe into the case last month, which it said involved eight grain-trading companies.

(Reporting by Liang-sa Loh and Ben Blanchard; Editing by Christian Schmollinger and Kim Coghill)

Taiwan Penalizes Deutsche Bank, 

3 Others for Currency Trades

Cindy Wang and Miaojung Lin

Sun, February 7, 2021, 

(Bloomberg) -- 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.

(Updates with probe from fifth paragraph.)

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