Taiwan penalized Deutsche Bank AG and three other foreign creditors after an investigation into speculation about the rise in the local currency last year involving grain companies.
Deutsche Bank’s commercial approvals for forward contracts in Taiwanese and undeliverable dollars will be revoked, and it will be banned from engaging in foreign exchange derivative transactions for two years, the island’s central bank said in a statement on Sunday.
ING Groep NV and Australia and New Zealand Banking Group Ltd. will not be allowed to engage in forward trading of Taiwanese dollars and non-deliverables for nine months, while Citigroup Inc. is prohibited from trading for two months on Taiwanese dollars, the central bank said. The penalties imposed on local units will take effect on Monday.
Banks were notified of the punishments on Friday. Negotiations made before the announcement 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 comments outside business hours.
Eight of Asia’s top food traders, with the help of six foreign banks, amassed $ 11 billion in their forward positions in Taiwan dollars at the end of July, the central bank said last month. The positions were based on physical grain trading abroad, deliberately traded through its Taiwan 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 of the subject. At least some of the trades were designed specifically to profit from the rise in the Taiwanese dollar, people said.
The island’s dollar appreciated by almost 7% against the US dollar in the past 12 months, among the region’s best performers, according to Bloomberg Contact info.
The central bank struck a deal with two creditors in November, it said on Sunday, without identifying them. The six banks violated the rules because forward trades had to be made based on their real needs, the central bank said on Sunday.
Deutsche Bank may reapply revoked approvals in the future, depending on improvements, according to Eugene Tsai, director general of the central bank’s Exchange Department.
Taiwan’s central bank tightly regulates how much of its dollars foreign companies can accumulate to avoid speculation about the currency. He said the huge positions that commodity companies have accumulated in terms of deliveries go beyond their real business needs.
– With the help of Argin Chang
(Updates with the proof of the fifth paragraph.)