Five international banks have been fined $3.1 billion by both United States and United Kingdom financial regulators over forex rigging.
The fines were announced simultaneously across the Atlantic today.
The U.S. Commodity Futures Trading Commission joined British counterparts in punishing British banks HSBC and Royal Bank of Scotland, US groups Citibank and JPMorgan Chase and Swiss bank UBS. The Americans imposed total fines of $1.4 billion.
The CFTC said these banks were being punished for “attempted manipulation of, and for aiding and abetting other banks’ attempts to manipulate, global foreign exchange (FX) benchmark rates to benefit the positions of certain traders.”
Britain’s Financial Conduct Authority imposed fines totalling £1.1 billion ($1.7 billion, 1.4 billion euros) on the five banks to settle allegations of foreign exchange rigging.
The FCA regulator said in a statement it had fined British banks HSBC and Royal Bank of Scotland, US groups Citibank and JPMorgan Chase, and Swiss bank UBS, for “failing to control business practices in their foreign exchange trading operations”. Each will pay in excess of £200 million, while Barclays was not included in the settlement but is still being investigated.
The Swiss Financial Market Supervisory Authority (FINMA) also announced a settlement of 134 million Swiss francs ($139 million) with UBS over the matter.
Barclays — which was at the heart of the 2012 Libor rate-rigging affair — was not included in the settlements, but it said it was still in talks with regulators.
A string of scandals has damaged the reputation of major banks, which had also helped sparked the notorious 2008 global financial crisis that led to a worldwide recession.
The FCA said that it found “ineffective controls” at the five banks between 2008 and 2013, allowing traders “to put their banks’ interests ahead of those of their clients, other market participants and the wider UK financial system”.
“The traders put their own interests ahead of their customers. They attempted to manipulate the market and abused the trust of the public and us as regulators,” FCA chief executive Martin Wheatley told reporters at a press conference in London.
The FCA said that it had proposed new rules for the 36 banks operating in the foreign exchange market.
The investigation homed in on trading in the world’s top 10 currencies, known as the “G10”.
Traders at the different banks “formed tight knit groups in which information was shared about client activity”, the British regulator said.
It added that traders used code to identify clients without naming the them, such as “The 3 Musketeers”, “The Players” and “The A-team”.
– ‘Conflicts of interest’ –
“The banks failed to manage obvious risks around confidentiality, conflicts of interest and trading conduct,” the FCA said.
At the same time, the CFTC announced in a separate statement that the five banks were being punished for “attempted manipulation of, and for aiding and abetting other banks’ attempts to manipulate, global foreign exchange benchmark rates to benefit the positions of certain traders.”
It added that Citi, HSBC, JPMorgan, RBS and UBS had “coordinated trading with other banks in private chat rooms in their attempts to manipulate” the market.