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It seems the Banking Sector just can’t keep itself out of trouble. From the US sub-prime mortgage crisis, which triggered the global financial meltdown, to the Libor fixing scandal and the former Co-Operative Bank chairman’s alleged drug scandal, the latest controversy to come out about big banks is an apparent fixing of exchange rates.
Business media jumped on recent accusations that traders at UK banks may have used undeclared personal accounts to make trades – in breach of transparency regulations within the sector – to effectively alter the spread achieved on foreign exchange trades and pocket the difference.
These accusations, for which around a dozen traders at various banks have reportedly been stood down, arose from an ongoing global investigation into at least 15 banks, spanning the UK, US, Europe and Hong Kong, which is seeking to determine whether a systemic rigging of international exchange rates has existed.
If proven to be the case, the ramifications for the banks could be enormous. They could find themselves liable for a new round of hefty penalties to authorities, legal action and even more costly, potential reimbursements to overcharged clients as was the case following the miss-selling of payment protection insurance products.
This serves as yet another problem affecting many of the larger banks, which is the culture of risk-taking in order to secure higher commission rates. So how does this affect you? If your business makes international payments the scandal could result in unfavourable exchange rates, which will be detrimental to your bottom line.
Protect Your Business
To protect your business, there are some questions you can ask yourself when deciding to work with a foreign exchange trader or reviewing your relationship with an existing one:
1. Is the company authorised by the Financial Conduct Authority (FCA)?
Authorised Payment Insitutions (APIs) that are authorised by the FCA are required to ensure the safety of client funds no matter what happens to the API by keeping them in segregated client accounts.
2. Are individual traders paid on commission?
Traders who are paid on commission may be motivated to work to their own gains; in extreme cases this could mean manipulating clients to trade in a bid to line their own pockets. Traders who do not work on commission can afford to put their clients’ requirements first, focusing on how best to help clients manage currency costs and risk.
At Smart Currency Business, we are ardently against employing traders on a commission structure. Instead, we believe that our clients are best served by traders who earn the same amount regardless of the value of trades they make. We are proud to maintain this approach and to focus on delivering exceptional customer service.
To learn more about our approach to managing international payments, call 020 7898 0500 or email [email protected]
