U.S. officials are investigating at least 10 major banks for possible rigging of precious-metals markets, even though European regulators dropped a similar probe after finding no evidence of wrongdoing, according to people close to the inquiries.
Prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday.
Also under scrutiny are Bank of Nova Scotia , Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Société Générale SA, Standard Bank Group Ltd. and UBS AG , according to one of the people close to the investigation.
The precious-metals probes are the latest example of regulatory scrutiny into how the world’s biggest financial institutions influence widely used benchmarks. Until last year, prices for gold, silver, platinum and palladium were set using a decades-old practice of once- or twice-a-day conference calls between a small group of banks. The process for setting each of the price “fixes” has since been overhauled.
Benchmarks for the four precious metals affect jewelry prices and financial products such as exchange-traded funds. U.S. commercial banks regulated by the Office of the Comptroller of the Currency had $115.1 billion of precious metals-related contracts outstanding as of Sept. 30.
In the interest-rate investigations, banks often reached settlements with U.S. and U.K. regulators, which made similar allegations of collusion in the rate-setting process. In contrast, the U.K. Financial Conduct Authority and German financial watchdog BaFin reviewed the precious-metals benchmarks but closed their inquiries without finding evidence of wrongdoing, according to people familiar with those probes.
Robert Hockett, a law professor at Cornell University, said it is “not particularly surprising” that the Justice Department is plowing ahead despite the decision by European regulators. Recent scrutiny of big banks’ operations in the physical commodities markets and criticism of the Justice Department’s financial-crisis track record make it “quite understandable” that the agency would investigate allegations of precious metals price-rigging.
The bank said at the time that it regretted the situation that led to the settlement and has enhanced its controls. A Barclays spokesman declined further comment.