Taiwan is being penalized Deutsche Bank AG and three other foreign lenders after an investigation into speculation about rising local currency last year involving grain companies.
Deutsche Bank’s trade approvals for deliverable forwards and non-deliverable forwards in Taiwan dollar will be withdrawn and it will be banned from conducting foreign exchange derivative transactions for two years, the island’s central bank said in a statement Sunday.
ING Groep NV and It is Australia & New Zealand Banking Group Ltd. not permitted to participate in trading of deliverable forwards and non-deliverable forwards in Taiwan dollar for nine months while Citigroup Inc. has been banned in Taiwanese dollar forward transactions for two months, the central bank said. The penalties imposed on the local units start on Monday.
The banks were informed of the penalties on Friday. Transactions made before the notification will not be affected, the central bank said.
Citigroup declined to comment. Deutsche Bank, ING and ANZ did not immediately respond to calls asking for comment outside office hours.
Eight of the leading food traders in Asia, with the help of six overseas banks, collectively built $ 11 billion in USD-denominated forward positions in Taiwan as of late July, the central bank said last month. The positions were based on overseas physical grain trade deliberately traded through their Taiwanese units to speculate on the local currency, affecting market stability, he said.
Cargill Inc. and Louis Dreyfus Co. were involved in this, along with Deutsche Bank, Citigroup, JPMorgan Chase & Co. and Standard Chartered Plc, Bloomberg News reported in January, citing knowledgeable people. At least some of the transactions were specifically designed to take advantage of the rising Taiwan dollar, the celebrities said.
The island’s dollar has gained nearly 7% against the US dollar in the past 12 months, one of the top-performing countries in the region, according to Bloomberg data.
The central bank settled with two lenders in November, he said on Sunday, without identifying them. The six banks broke the rules because the forwards trades had to be executed according to their actual needs, the central bank said on Sunday.
Deutsche Bank may reapply for the revoked trade approvals in the future, subject to improvements, said Eugene Tsai, the Department of Foreign Exchange’s central bank director general.
Taiwan’s central bank closely monitors how much of its dollars foreign companies can build up to avoid speculation on the currency. It had said that the huge positions the commodity companies had built up in deliverable futures went beyond their actual business needs.
– With the help of Argin Chang
(Updates with probe from fifth paragraph.)