BNP leading European exporting wine on fire losses in Forex trading
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BNP Paribas has complained to the plaintiffs that its traders have sold billions of euros in exchange for losses to Europe’s largest wine exporter, in a wider controversy that has also surrounded Goldman Sachs and Deutsche Bank in recent allegations.
J. García Carrión, founded in southeastern Spain in Jumilla, in 1890, is in dispute with the French lender about currency transactions, accumulating a notional amount of ten billion euros. According to people familiar with the matter, the loss-making profession was improperly conducted between 2015 and 2020 with a former senior executive.
BNP is one of the banks that is suffering from complaints from Spanish corporate companies due to alleged mis-selling of foreign currency derivatives, which has led some companies to financial difficulties.
Deutsche Bank has launched an internal investigation of the alleged mis-selling that this week has brought the departure of two high-ranking officials, Louise Kitchen and Jonathan Tinker.
According to an internal investigation by JGC, the BNP made more than 8,400 exchange transactions with the company over a five-year period, equivalent to about six per working day.
This level of activity was much higher than what the company would need to cover the normal exchange rate risk of international wine exports, people said, adding that the Spanish company has shared the results of its internal probe with the BNP.
While most of the questions related to the euro-dollar swaps that moved against the bank were mostly, some were in currency pairs, where the JGC has little or no operations, such as the euro-Swedish krona.
As a direct result, the company’s revenue of 850 million euros has led to a loss of about 75 million euros in those five years, and the BNP has been able to earn more than 100 million euros from transactions, people added. Many agreements were made through the London trading desks.
Executives have demanded compensation for at least some losses, arguing that BNP traders or the compliance department should view and report the disproportionate high of a single customer’s transactions and profits, according to several people familiar with the events.
JGC said the business was designed as a bet on currency markets rather than hedging and people said they are looking into a lawsuit to try to recover some of the money.
“BNP Paribas very strictly complies with all regulatory obligations related to the sale of derivatives and foreign exchange instruments,” the bank said in a statement. “We don’t comment on customer relationships.”
JGC has not commented.
Separately, the Spanish wine producer is suing Goldman Sachs in the London High Court for the loss of $ 6.2 million in losses caused by exotic currency derivatives. Goldman said products for multinational companies that needed coverage were not very complex and the risks were fully disclosed.
In Madrid, the wine company has filed a lawsuit against the former senior official in charge of signing the loss operations. JGC alleges that this person did business in secret and covered up inside it by falsifying documents and misleading auditors.
In the London lawsuit, JGC complained that its executive was acting “with the impetus and / or recommendations” of Goldman employees “for speculative purposes rather than investment or hedging.”
Deutsche Bank has been investigating for months that traders in London and Madrid had to sidestep EU rules and convince hundreds of Spanish companies to buy or buy sophisticated foreign exchange derivatives that they did not understand.
The Financial Times reported that the German bank had privately resolved numerous allegations against it and prevented it from going to court.
People familiar with the matter told FT that the departure of Kitchen and Tinker was linked to a probe into the alleged mis-selling, which appears to have occurred in both supervised units at the time.
The bank declined to comment. Kitchen and Tinker did not respond to requests for comment.
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