LONDON: Five banks have been fined total £2bn by UK and US regulators for traders’ attempted manipulation of foreign exchange rates. HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase and Citibank have all been fined. A separate probe into Barclays is continuing.
The UK’s Financial Conduct Authority (FCA) and the US regulator, the Commodity Futures Trading Commission (CFTC) issued the fines. Separately, the Swiss regulator, FINMA, has penalised UBS 134m Swiss francs. Barclays, which had been expected to announce a similar deal to the other banks, said it would not be settling at this time.
“After discussions with other regulators and authorities, we have concluded that it is in the interests of the company to seek a more general coordinated settlement,” it said in a statement. Jump media playerMedia player helpOut of media player. Press enter to return or tab to continue.
Martin Wheatley, FCA: Forex failings “let down public trust”. FCA boss Martin Wheatley: “This isn’t the end of the story”. “The individuals themselves will face the consequences,” he said. Several senior traders at the banks have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme. The fines follow a year-long investigation by regulators into claims that the foreign exchange market – in which banks and other financial firms buy and sell currencies between one another – was being rigged.
The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets. About 40% of the world’s dealing is estimated to go through trading rooms in London. There is no physical forex marketplace and nearly all trading takes place on electronic systems operated by the big banks and other providers. Daily “spot benchmarks” known as “fixes” are used by a wide range of financial and non-financial firms to, for example help value assets or manage currency risk.
The FCA fined the five banks a total of £1.1bn, the largest fine imposed by it or its predecessor, the Financial Services Authority. “At the heart of today’s action is our finding that the failings at these banks undermine confidence in the UK financial system and put its integrity at risk,” the FCA said.
The US regulator, the Commodity Futures Trading Commission (CFTC), has fined the same banks a total of more than $1.4bn (£900m). “The setting of a benchmark rate is not simply another opportunity for banks to earn a profit. Countless individuals and companies around the world rely on these rates to settle financial contracts,” said the CFTC’s director of enforcement Aitan Goelman.
Jump media playerMedia player helpOut of media player. Press enter to return or tab to continue. Chancellor George Osborne says “tough action” is being taken to “clean up corruption in the City by a few”. Both regulators found the attempted manipulation of the foreign exchange market had been going on for several years, with the FCA saying the failings occurred between 1 January 2008 and 15 October 2013. The CFTC said its investigation found the traders’ misconduct took place between 2009 and 2012. They found certain foreign exchange traders at the banks had coordinated their trading with one another to attempt to manipulate benchmark foreign exchange rates.
The CFTC said traders had used private online chat rooms to communicate. They had disclosed confidential customer order information and trading positions, and altered their positions accordingly to “benefit the interests of the collective group”. The FCA said the “tight knit groups” formed by traders at the different banks had used code names for clients including “the 3 musketeers”, “the A-team” and “1 team, 1 dream”.
