Major banks fined $3.4B for manipulating currency markets
U.S., British and Swiss regulators have fined five global聽banks聽$3.4 billion for attempting to manipulate foreign聽exchange markets 鈥� the latest penalties for an industry previously criticized for rigging interest rates and for their role in triggering the global financial crisis.
The U.S. Commodity Futures Trading Commission, the U.K. Financial Conduct Authority and the Swiss Financial Market Supervisory Authority said Wednesday that Citibank, JPMorgan Chase聽Bank, Royal聽Bank聽of Scotland, HSBC聽Bank聽and UBS had agreed to settlements totaling almost $3.4 billion. The FCA said it is continuing to investigate Barclays听叠补苍办.
"Today's record fines mark the gravity of the failings we found, and firms need to take responsibility for putting it right," said Martin Wheatley, chief executive of the FCA. "They must make sure their traders do not game the system to boost profits."
Some $5.3 trillion changes hands every day on the global聽foreign聽exchange market, with 40 percent of trades occurring in London. Currencies including dollars, pounds, euros and yen trade in the loosely regulated market dominated by a group of elite聽banks. But those trades have an even wider impact because companies around the world use market prices to value assets and manage currency risks.
The regulators found that between Jan. 1, 2008 and Oct. 15, 2013, the five聽banks聽failed to adequately train and supervise foreign聽currency traders. As a result, traders were able to form groups that shared information about client activity, using nicknames such as "the players, "the 3 musketeers" and "1team, 1 dream."
"Traders shared the information obtained through these groups to help them work out their trading strategies," the FCA said in a statement. "They then attempted to manipulate fix rates and trigger client 'stop loss' orders." Stop loss orders limit client losses in the face of adverse currency movements.
The traders tried to manipulate the market to ensure that their聽banks聽made a profit, the Financial Conduct Authority said.
"It is completely unacceptable ... for firms to engage in attempts at manipulation for their own benefit and to the potential detriment of certain clients and other market participants," the U.K. regulator said.
RBS Chairman Philip Hampton said the聽bank聽accepted the criticism and condemned the actions of the employees responsible.
"Today is a stark reminder of the importance of culture and integrity in聽banking聽and we will rightly be judged on the strength of our response," Hampton said in a statement.
RBS has started disciplinary action against six employees, three of whom have been suspended.
The聽Bank聽of England conducted a separate inquiry into the role of its officials in the聽foreign聽exchange market. The investigation by outside attorneys found no evidence that the central聽bank聽was involved in unlawful or improper behavior but it said its chief聽foreign聽exchange dealer was aware that traders were sharing information.
From at least Nov. 28, 2012, the聽bank's聽chief dealer had concerns this could involve "collusive behavior," but failed to notify his superiors.
"This was an error of judgment for which he should be criticized," the investigator, Anthony Grabiner, said in his report. Grabiner stressed the dealer did not act in bad faith and was not involved in unlawful or improper behavior.
The U.S. Department of Justice and other authorities are conducting their own investigations and further penalties are possible. Barclays said in a statement that "after discussions with other regulators and authorities," it decided to seek a more general coordinated settlement."
Regulators in Britain, Switzerland, the U.S. and Asia have been investigating the聽banks' conduct for months, and negotiating settlements with the聽banks.
For their part, the聽banks聽already had factored in the prospect of heavy fines by putting money aside to cover the cost. Citigroup took a $600 million charge while JPMorgan Chase & Co. about $400 million. Barclays, HSBC and Royal聽Bank聽of Scotland similarly set aside hundreds of millions of dollars.
The foreign-exchange scandal again lifts the curtain on misconduct in the聽banking聽world and is the latest black eye for big international聽banks. Five big聽banks聽鈥� including Britain's Lloyds, Barclays and Royal聽Bank聽of Scotland 鈥� have been sanctioned for alleged manipulation of a key global interest rate in a continuing investigation. The five聽banks聽together have paid nearly $4 billion in settlements, and several individuals have been criminally charged by U.S. authorities.
The London interbank offered rate, known as LIBOR, is used by聽banks聽to borrow from each other and affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.
Major Wall Street聽banks聽including JPMorgan Chase,聽Bank聽of America and Citigroup have each paid billions of dollars in settlements with the Justice Department and other U.S. agencies over their role in selling the toxic mortgage securities that fueled the worst financial crisis since the 1930s and threw millions of homes into foreclosure.
