NY DFS Now Investigating Bank’s ISDAfix Manipulation

The New York Department of Financial Services is now investigating manipulation of the ISDAfix benchmark, which is used in interest rate swaps. The CFTC issued subpoenas to nearly twenty players involved with the benchmark rate and later informed the Department of Justice to look into possible criminal issues that were discovered. The CFTC fined Barclays $115 million in May in the first ISDAfix settlement.

I suspect Barclays won’t be the only one fined in these investigations, either. Potential issues for Deutsche Bank related to the ISDAfix were reportedly made public recently by a report from Germany’s BaFin. The confidential report criticized Deutsche Bank’s co-chief executive Anshu Jain for statements made to the Bundesbank during an investigation. Jain announced his resignation in early June.

This investigation may be one of the first prosecuted after the changing of the guard among New York’s financial regulator. Benjamin Lawsky announced earlier this year that he was stepping down as the head of the department in under to start his own legal and consulting business. Lawsky will be succeeded temporarily by his chief of staff Anthony Albanese. Lawsky’s letter to the team announcing the news says that Governor Cuomo’s office is conducting a search for a permanent replacement.

Lawsky led the charge by the NY watchdog that led to $3+ billion in fines against banks during his four years. The DFS is the state regulator in charge of overseeing many global banks because they are licensed and operating in New York City.

It is unclear what this will do to the potential for expansion of New York’s whistleblower rewards. At the beginning of this year, Lawsky called for New York to adopt a financial whistleblower program similar to the SEC program. A bill to reward DFS whistleblowers has previously been considered by New York legislators.

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