Corner of Bay Street and Adelaide streets in Toronto. July 25, 2013.Gloria Nieto/The Globe and Mail
How did a Canadian bank end up in an intelligence bulletin from the U.S. Federal Bureau of Investigation – and which one is it?
That's the mystery surrounding a report from Reuters today, which details FBI concerns that traders could be manipulating a market in interest-rate derivatives.
Traders at two banks – one Canadian, one American – are suspected of "front-running" large orders for interest-rate swaps, the Reuters report said, citing an FBI intelligence bulletin sent last week by the bureau's field office in Charlotte, N.C. .
The information came from a former high-level employee at a U.S. bank and an employee at a Canadian bank, the FBI said, according to Reuters. The employees reported that senior bankers at both institutions "planned and encouraged this behavior because it led to higher revenue for their respective parent banks," the bulletin said.
A spokesperson for Toronto-Dominion Bank said the firm had "nothing to add" and declined to comment further. Royal Bank of Canada declined comment. Spokespeople for Bank of Montreal, Canadian Imperial Bank of Commerce and Bank of Nova Scotia did not immediately respond to queries.
Shelley Lynch, a spokesperson for the FBI's Charlotte field office, declined to comment. A spokesperson for the local federal prosecutor's office said she was unable to comment on the matter, which has not generated any court filings. The Securities and Exchange Commission also declined the opportunity to comment.
It's unclear whether the FBI is still looking into the matter. The Reuters report, citing the bulletin, said that federal agents interviewed bank workers in 2012 and 2013. The bureau had "medium confidence" in the information it received, the bulletin said, which came from "multiple corroborating sources." But it had "low confidence" that such behaviour could result in prosecutions.
The Reuters report suggests a previously unknown instance of market-rigging. In recent years, traders have been linked to schemes to manipulate currencies, benchmark interest rates, and commodity futures. So far, however, Canadian banks have not been mentioned in connection with such probes.