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Taiwan punishes foreign banks in speculation case, sources say

TAIPEI, Feb 5 (Reuters) - Taiwan’s central bank on Friday told four foreign banks they would be suspended from trading in the deliverable forwards foreign exchange market for their role in helping grains firms speculate against the Taiwan dollar, three sources with direct knowledge of the matter said.

The Taiwan dollar is at a more than 23-year-high against the greenback as the island’s trade-dependent economy booms on the back of global demand for its tech products.

The central bank has tried using “moral persuasion” to slow the currency surge, but has been particularly concerned about the grains case, and said last month it would punish four banks, though did not name them.

The sources told Reuters the central bank had sent letters outlining the punishment to Deutsche Bank, Citigroup Inc, ING and Australia and New Zealand Banking Group Ltd.

Citi and Deutsche declined to comment. Representatives for the other two banks did not immediately respond to requests for comment. The central bank’s spokesman did not answer calls seeking comment.

The banks’ Taipei branches will be suspended from carrying out deliverable forwards foreign exchange trades for a period of time that will depend on how serious the central bank judged their role in the original case, the sources said.

The suspension will be a year or more for the most serious cases, the sources said, without saying the length of time being applied to each bank.

The central bank said last month that starting from July 2019, eight grains trading companies ostensibly carrying out routine currency transactions for their business had in fact engaged in currency speculation through deliverable forwards.

The bank said this had affected the stability of Taiwan’s foreign exchange market.

It put the total value of the trades at $11 billion.

The central bank has not publicly named any of the banks or companies involved. (Reporting by Liang-sa Loh. Writing by Ben Blanchard. Editing by Mark Potter)

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