Taiwan penalized Deutsche Bank AG and three other foreign creditors after an investigation into speculation about the growth of the local currency last year, involving grain companies.
Deutsche Bank’s trading approvals for forward and unrealizable deliveries in Taiwan dollars will be revoked and it will be banned from trading in foreign exchange derivatives for two years, the island’s central bank said on Sunday.
ING Groep NV and Australia and New Zealand Banking Group Ltd. will not be permitted to engage in forward forward trading in Taiwan dollars and non-deliverable forward transactions for nine months, while Citigroup Inc. It is forbidden to trade forward deliveries in Taiwan dollars for two months, the central bank said. Sanctions imposed on local units will take effect on Monday.
Banks were notified 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 requesting out-of-hours comments.
Eight of Asia’s largest food traders, with the help of six overseas banks, have built a combined $ 11 billion in Taiwan dollar delivery positions since the end of July, the central bank he said last month. The positions were based on foreign grain transactions 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, along with Deutsche Bank, Citigroup, JPMorgan Chase & Co. and Standard Chartered Plc, among others, Bloomberg News reported in January, citing people with knowledge about the issue. At least some of the transactions were specifically designed to take advantage of the rising Taiwan dollar, well-known people said.
The island’s dollar has strengthened by almost 7% against the US dollar in the last 12 months, among the best performing in the region, according to Date Bloomberg.
The central bank settled with two creditors in November, it said on Sunday, without identifying them. The six banks broke the rules because forward transactions had to be made based on their real needs, the central bank said on Sunday.
Deutsche Bank may again request revoked trading approvals in the future, subject to improvements, according to Eugene Tsai, general manager of the foreign exchange department’s central bank.
Taiwan’s central bank strictly regulates how many dollars foreign companies can accumulate to avoid speculation about the currency. He had said that the huge positions that freight companies had built into deliverables before exceeded their real business needs.
– With the assistance of Argin Chang
(Probe updates from the fifth paragraph.)