Korean financial authorities on Friday dismissed the possibility of foreign exchange rate manipulation in the local financial market, saying it has no plans to investigate.

But critics said Korea’s authorities are taking a lukewarm stance toward the rate-rigging scandal that is snowballing abroad.

They argued Korean authorities’ stance appears passive compared to major regulatory agencies in Europe and the United States that are poised to investigate alleged rule-breakers or similar cases.

According to the allegations raised by some foreign media, dealers at the world’s biggest banks colluded with counterparts at different firms to boost the chances of moving the rates.

The manipulation occurred daily in the spot foreign exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, said the news reports.

Insisting the WM/Reuters currency rate system has some problems, foreign media such as Bloomberg and the Financial Times said the U.K.-based supervisor Financial Conduct Authority was considering a probe into potential manipulation of the rates.

The European Commission and U.S. regulators have already been looking into some big investment banks’ allegedly similar misdeeds involving fabrication of crude oil prices or the ISDAfix rate.

In contrast, Korea’s four foreign exchange authorities and regulators clarified Friday that they would not launch a probe into whether Korean units of foreign banks might be involved in the alleged manipulation of foreign exchange rates. They are the Finance Ministry, the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service.

An official at the FSS argued that the kind of alleged foreign exchange rigging cannot be committed in the local market, saying that Korea’s exchange rate publication system was different from the WM/Reuters foreign exchange rate system.

“Korea publicizes exchange rates based on the average of trading volume,” he said. “In the case of the U.K., there might be manipulation cases as the rates are sometimes made public irrespective of trading volume.”

London School of Economics visiting fellow Tom Kirchmaier was quoted by Bloomberg Businessweek as saying, “Any rigging of the price mechanism leads to a misallocation of capital and is extremely costly to society.”

Four global banks ― Deutsche Bank, Citigroup, Barclays and UBS ― reportedly take up about 50 percent of the global foreign exchange market in terms of trading volume.

Bloomberg said spokesmen for the four banks declined to comment. According to market insiders, the WM/Reuters used foreign exchange rates as benchmarks to set the value of trillions of dollars of investments.

“Bank employees have been trading ahead of client orders and fabricating the rates by pushing through trades before and during the 60-second window when the benchmarks are set,” an anonymous source was quoted as saying.

By Kim Yon-se (kys@heraldcorp.com)