Bank of Nova Scotia is closing its metals business, a division whose origins date back centuries and that brought prominence — and then lawsuits — to Canada’s third-largest bank.
Employees were informed of the decision to shutter the operation during a conference call Tuesday morning, sources told the Financial Post.
The size and scope of the division had been scaled down in recent years to reduce risk in the metals business, a source said on condition they would not be identified. As a result, the operation was no longer core business.
A spokesperson for Scotiabank declined to comment Tuesday.
Reuters news agency, citing sources, said Scotiabank would not take on new business and would wind down existing activities by around the beginning of 2021. Some staff would be kept on until then while others would be made redundant, Reuters said.
Around 15 people worked in Scotiabank’s metals business, Reuters said, about three-quarters of them in precious metals and the remainder in industrial metals.
Scotiabank became a big player in metals trading in 1997, when the it bought Mocatta Bullion from Standard Chartered PLC. Mocatta was founded in 1684 and, when Scotia bought it, it had 180 employees and 10 offices around the world in locations including New York, London, New Delhi, Hong Kong, Shanghai and Singapore.
Scotiabank’s prominence in the market segment continued to rise and in 2004 it became the first non-British bank to chair the London Gold Fixing, a twice-daily setting of a key benchmark price for gold. That year, Scotia’s chief executive was photographed proudly holding a gold bar to celebrate the bank’s stature.
But a little more than a decade later, Scotiabank’s precious metals operation had become a target of lawsuits in Canada and the United States along with the group of international financial institutions that took part in the London Gold Fixing.
In class action lawsuits, the banks, including Deutsche Bank AG, Société Générale SA, Barclays PLC, HSBC PLC and Scotiabank, were accused of manipulating the gold market, which is worth trillions of dollars in trading value per year.
A smaller subset, including Scotiabank, was also accused of manipulating the silver market by rigging the daily Silver Fix.
None of the allegations has been proven.
The shuttering of Scotiabank’s metals division has no bearing on the Canadian lawsuit, according to Kirk Baert, a partner at Toronto-based Koskie Minsky LLP, one of the law firms involved in the case.
“The action continues,” he told the Post in an email Tuesday.
The spokesperson for Scotia also declined to comment on the class actions and a separate case in New York in which a former Scotiabank and Bear Stearns trader in New York pleaded guilty last year to manipulating precious metals markets.
Scotiabank’s metals division, which once had operations in Europe, Asia, and North America — and, for a time, sold precious metals products through an online e-store — has been under review for at least a couple of years. It was previously scaled down, reportedly as a result of the legal tangles and its performance.
Parts of the operation were folded into the bank’s broader global banking and markets operations, a source said Tuesday.
Bloomberg News last year reported that the Mocatta name was being dropped from Scotia’s metals operations, and that the bank was getting out of the business of supplying gold to jewelry industries in Italy and India.
There were also reports the metals division was put on the block, but a sale never materialized.