Feds to put monitors inside two banks

by Walter Olson on August 19, 2014

Via Politico, a WSJ news item from last month that should not pass unremarked:

New York’s banking regulator is pushing to install government monitors inside the U.S. offices of Deutsche Bank and Barclays … as part of an intensifying investigation into possible manipulation in the foreign-exchange market … The state’s Department of Financial Services notified lawyers for the two European banks earlier this month that it wanted to install a monitor inside each firm, based on preliminary findings in the agency’s six-month currencies-market probe … Negotiations are continuing over the details of the monitors’ appointments, but New York investigators expect to reach an agreement soon.

The regulatory agency has selected Deutsche Bank and Barclays for extra scrutiny partly because the records it has collected so far from more than a dozen banks under its supervision point to the greatest potential problems at those two banks, the people said. Plus, Deutsche Bank and Barclays are among the dominant players in the vast foreign-exchange market, so investigators hope a close-up view into their businesses will help them observe other players and trading patterns [emphasis added -- W.O.].

We’ve covered the expanding role of settlement and litigation monitors in past posts, and noted the seemingly arbitrary and unaccountable powers these monitors may exercise during their stay within the enterprises to which they are embedded. But there’s something novel (isn’t there?) about the installation of monitors loyal to state overseers whose mission includes watching other firms and market players besides the one that has admitted misbehavior (or has been found by a court to have misbehaved). When you have dealings with a company, and perhaps decide to entrust your sensitive personal or business data to it, should you be worried that it wind up crossing the screen or desk of a quietly emplaced monitor reporting back to Albany, or perhaps Washington?

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