International Commercial Bank of China was complained for providing the foreign exchange services concerning purchasing Deutschmarks and selling Euros in violation of the Fair Trade Law
Chinese Taipei
International Commercial Bank of China was complained for providing the foreign exchange services concerning purchasing Deutschmarks and selling Euros in violation of the Fair Trade Law
Key Words:
fixed conversion rates, foreign exchange services, foreign exchange rate table, trading information
Reference:
Fair Trade Commission Decision of April 3, 2003 (the 595th Commissioners' Meeting); Letter Kung Yi Tzu No. 0920003139
Industry:
Domestic Banks (6512)
Relevant Law:
Articles 24 of the Fair Trade Law
Summary:
1. This case originated from a complaint letter filed by a client of the International Commercial Bank of China (ICBC). The client went to the ICBC at the beginning of the year 2002, intending to convert Deutschmark currency into Euros. One of the bank clerks, however, instructed the client to go to the inward foreign exchange counter first to convert Deutschmarks into New Taiwan Dollars and then to the outward foreign exchange counter to convert New Taiwan Dollars to Euros. It was impossible for the client to convert deutschemarks into Euros at the fixed conversion rates announced by the European Central Bank for currencies of its member countries. The client viewed this manner of operation as unreasonable because he had to bear the extra transaction commissions and foreign exchange differences incurred thereby.
2. During the transition period for the adoption of the Euro (January 1st through
June 30, 2002), European Union member countries ceased issuing and started to
recall their currencies, but they were still in use and circulation. Euros were
on the market since 2002, used along with the currencies of the EU member countries,
with the conversion rates for Euros decided by the supply and demand on the
foreign exchange market. Taking Deutschmarks in the present case as an example,
as a practice on the global foreign exchange market, purchase and sale prices
would be posted for the physical Euro currency, but only purchase prices and
no sale prices would be posted for the physical Deutschmark currency. The ICBC
offered foreign exchange services up to the end of February 2002, a date within
the transition period. Therefore, the ICBC seemed to be well justified in conducting
transactions at the posted foreign exchange rates.
Secondly, the dispute in the present case arose from the fact that the complainant
was comparing the fixed conversion rates of the European Union members' currencies
(such as Deutschmarks) into Euros as announced by the European Central Bank
with the actual posted exchange rates that were used by the respondent on the
transaction date. Upon investigation, its was discovered that the above fixed
conversion rates were used for exchange of physical currencies in the European
Union countries and for account processing by banks. For regions other than
the Euro countries (e.g., Taiwan), the conversion rates for physical currencies
fluctuated according to actual market conditions.
In addition, postings of foreign exchange rates by both local and foreign banks
generally display the amount of local currency that must be paid or which can
be gained in exchange for a unit of a particular foreign currency. Banks processing
physical exchange between two foreign currencies, however, have to bear physical
currency-related freightage costs, insurance premiums, commission payable to
foreign banks, and holding costs. Therefore, Taiwan banks handling exchange
between Deutschmarks and Euros found it difficult to accept direct foreign exchange
of the two currencies at the above fixed conversion rates, and needed New Taiwan
Dollar accounts for account processing purposes. Besides, the ICBC simply bought
back Deutschmarks, and thus the aforesaid operation costs were incurred and
attached to each single transaction. Accordingly, the ICBC's foreign exchange
services to purchase Deutschmarks and sell Euros in the present case were different
from the foreign exchange operations conducted at fixed conversion rates by
the European Union member countries. The complainant's allegation was probably
caused by a misunderstanding of how banks operate, and the ICBC was not reproachable
for its conduct of foreign exchange operations.
Additionally, no service fee was listed on the “Inward Exchange Memo and Service
Fee Receipt” and “Outward Exchange Memo and Service Fee Receipt” provided by
the complainant for that transaction, which conformed to ICBC's statement that
it handled exchanges between foreign currencies and New Taiwan Dollars at the
prices listed on the conversion rate table, without charging any service fee.
Furthermore, prior to the expiration of transition period for the adoption of
Euros, as stated above, the purchase prices for the currencies of the European
Union countries (such as Deutschmarks) and purchase and sales prices for Euros
were simultaneously posted and available on the foreign exchange market. Following
the market practice, the ICBC posted the conversion rates both for currencies
of the European Union countries (such as Deutschmarks) and for Euros to be selected
by clients, and posted conversion rates for physical currencies at its places
of business and on its website for clients' information. The complaint in the
present case went to one of ICBC's places of business close to the end of the
period during which the ICBC's offered the foreign exchange services at issue.
Obviously, the complainant was able to acquire the information from the foreign
exchange table that he had to sell Deutschmarks and purchase Euros separately
at the conversion rates posted on the transaction date, and in addition, there
was no conversion rate for direct exchange of Deutschmarks for Euros posted
on ICBC's foreign exchange rate table. Therefore, it was unlikely that general
consumers would be deceived and would mistakenly believe that they had other
conversion options. There was no evidence to support the contention that the
respondent intentionally concealed trading information.
3. Based upon the evidence then available, it was difficult to hold that the ICBC violated Article 24 of the Fair Trade Law with its foreign exchange services in relation to purchase of Deutschmarks and sales of Euros.
Appendix:
The International Commercial Bank of China's Uniform Invoice Number: 03705903
Summarized by Tseng, Chiu-Chen; Supervised by Horng, Der-Chang