South Korea’s competition watchdog is probing whether local companies were adversely affected by the rigging of foreign exchange markets by six global banks.
Jeong Jae-chun, the chairman of the Fair Trade Commission, confirmed the probe during a parliamentary hearing on Wednesday but declined to give further details.
Barclays, Citigroup, JPMorgan Chase, Royal Bank of Scotland, Bank of America and UBS have agreed to pay fines more than $5.6bn in Europe and US to settle allegations they rigged the $5.3tn-a-day forex market.
Lawyers said it would probably take the regulators years to prove the damaging effects on local companies in South Korea, although their rigging of euro-dollar rates was likely to have affected local market rates such as won-dollar or won-euro.
Korean banks engaged in an average $2.8bn of euro-dollar trades a day between 2007 and 2013, according to Bank of Korea, to meet demand from local exporters and importers with operations in Europe.
Separately, Korean companies plan to file a collective lawsuit against the six global banks seeking damages from their forex trades. Daeryook & Aju, a law firm, has agreed to represent eight small and midsized enterprises that allege they suffered huge losses from “knock-in, knock-out” currency contracts as the global banks manipulated forex rates.
Hundreds of Korean SMEs were caught out by the so-called knock-on, knock-out contracts that protected them against a rising won versus the dollar but left them exposed to the opposite move in 2008-13. The law firm has also contacted several Korean conglomerates to ask whether they want to join the action.
“We are talking to several big potential victims of the international forex rigging scandal and plan to file a lawsuit in the UK in September,” said Kim Sung-mook, a lawyer at Daeryook.
“Many big conglomerates as well as SMEs have shown interest in joining the lawsuit as we have secured evidence of won-dollar rigging by such global banks.”
In the US and Europe, regulators have focused on activity in the euro-dollar exchange rate, but Korean regulators could impose separate fines on the six banks if they are found to also have rigged won-dollar rates, Mr Kim said. Last month, South Africa said it was looking into several global and domestic banks for allegedly fixing forex trades.
South Korea’s antitrust regulators have been investigating domestic banks over possible interest rate collusion and local banks and brokerages over suspected manipulation of a national benchmark loan rate but have yet to announce any findings.
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