Deutsche, BNP Paribas colluded on FX bids

The FTC said Deutsche Bank and BNP Paribas conspired on 45 contracts when bidding with Korean companies.

Two foreign banks were found of colluding in pocketing unfair profits in forward exchange transactions.

Forward exchange is a financial product that is targeted at hedging risks stemming from fluctuating foreign currencies.

Deutsche Bank and BNP Paribas conspired on 45 contracts when bidding for forward exchange contracts with Korean companies between 2011 and 2015, the Fair Trade Commission said.

According to the antitrust agency, the sales employees of the banks were in contact through messenger apps and by phones since April 2011 while participating in the monthly bidding of a Korean company’s forward exchange contract.

In the 44 bids since then both Deutsche Bank and BNP Paribas each won 22 contracts worth $224 million.

Not only did the two banks agreed to allow each other to win, they also agreed to raise the profit that is earned from the forward contract to a minimum 2 won per dollar. BNP Paribas’ profit on forward exchange contracts before the collusion was on average 0.9 won per dollar.

“Because of the collusion the [Korean] company’s cost on the forward exchange contracts were higher than usual,” said Ahn Byung-hoon, head of international cartel at the FTC.

The two banks also agreed that BNP Paribas would be the winner on a forward exchange contract bid by another Korean company in November 2011. Under the agreement Deutsche Bank proposed a higher price on the contract than BNP Paribas. The contract was worth 6.61 million euro ($7.3 million).

The banks were fined a combined 176 million won ($157,432).

In March 2016, Deutsche Bank and HSBC were fined 59 million won for colluding on foreign exchange swap bidding.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]