Bank Fined Over Plan to “Break” Currency Peg
Posted by Colin Lambert. Last updated: May 6, 2023
The UK’s Financial Conduct Authority (FCA) has announced a £10 million fine against a London-based boutique bank over alleged plans to break the US dollar currency peg of the Qatari riyal during a period of middle-eastern diplomatic tensions.
The FCA says in the notice that fines Banque Havilland, which was formed in 2009 and is headquartered in Luxembourg, £10 million along with three employees, that it created and presented a document to Abu Dhabi investors which proposed a series of steps “with the purpose of devaluing the Qatari riyal and breaking its peg to the US dollar”.
The FCA has fined former London branch CEO, Edmund Rowland, £352,000; David Weller, a former London branch senior manager, £54,000; and Vladimir Bolelyy, a former London branch employee, £14,200. The FCA says it has also decided to ban all three individuals from working in financial services.
In its Notice, the FCA says the background to the case was rising diplomatic tensions between a coalition of Gulf States and Qatar over accusations the latter was supporting terrorism. The strategy was created by the individuals at the bank and the FCA says it involved quietly buying Qatari bonds to “get ownership” and control the yield curve by cooperating parties “acting in concert”.
The bonds would at some stage be “dumped” on the market to drive the price down, after which the parties involved would “establish positions in forwards on riyal, options where possible”, and “get long the CDS slowly with larger houses, just enough to move the price to make it newsworthy”.
The next stage was to “fire up the PR machine…to remind people there is a problem with Qatar”, along with an increase in the CDS position.
The FCA says it has not found that the strategy in the document was implemented, however it states that “such manipulative trading could have been a criminal offence, had it taken place in the UK”. The bank, as well as Rowland and Bolelyy have referred their cases to an upper tribunal for appeal.
“Banque Havilland’s conduct actively encouraged the commission of financial crime, providing ideas for manipulative trading to someone it saw as having the political motivation to be potentially interested in such ideas,” says Therese Chambers, executive director of enforcement and market oversight at the FCA. “It barely needs stating, but such conduct is completely unacceptable.
“The misconduct of Mr Edmund Rowland and Mr Bolelyy was deliberate,” she continues. “Mr Weller claimed to have believed that the other two were joking around but as a senior manager he behaved recklessly. There was an obvious risk of impropriety and he willingly took that risk without seeking any assurances that things would go no further.”