The Tip of the Iceberg?

Six banks fined $5.6bn over rigging of foreign exchange markets.
Bank Fines Summary
May 20, 2015 17:27 (Financial Times)

Six global banks will pay more than $5.6bn to settle allegations that they rigged foreign exchange markets, in a scandal the FBI said involved criminality “on a massive scale”.

Four banks also agreed to plead guilty to conspiring to fix prices and rig bids in the $5.3tn a day FOREX market, in what they hope will draw a line under one of the biggest cases of misconduct in banking since the global financial crisis.

Barclays Plc
Barclays
New York banking regulator Benjamin Lawsky said Barclays operated a ‘heads I win, tails you lose scheme to rip off its clients’

Bank of America
BankofAmerica

Citi Group
citigroup
Citigroup trailed only Barclays in the size of its fines. The bank agreed to pay an additional $1.3bn to US regulator.

HSBC
HSBC

JP Morgan Chase
JPMorganChse
The US DoJ said JPMorgan traders were among those to use ‘an exclusive electronic chat room and coded language’ to manipulate rates.

Royal Bank of Scotland
RBS

UBS
UBS
The US DoJ said UBS had engaged in deceptive trading and sales practices, including ‘undisclosed mark-ups’. UBS chairman Axel Weber said ‘the conduct of a small number of employees was unacceptable’. His bank was ordered to pay $545m.

The US attorney-general Loretta Lynch said the banks’ penalty was ‘fitting’. ‘It’s commensurate with the pervasive harm that was done’.

Announcing the settlement, the US Department of Justice said that between December 2007 and January 2013, traders at Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland who described themselves as “The Cartel” used an exclusive chatroom and coded language to manipulate benchmark exchange rates, “in an effort to increase their profits”.

One Barclays trader wrote in a November 5, 2010 chat: “If you aint cheating, you aint trying”, according to the New York Department of Financial Services (DFS), which was part of the settlement.

Loretta Lynch, the US attorney-general, said the penalties the banks will pay were “fitting”, and “commensurate with the pervasive harm that was done”. The fines should “deter competitors from chasing profits without regard to fairness to law or public welfare”.

“This is a major blow for these banks, both financially and for their reputation,” said Mark Taylor, Dean of Warwick Business School, who sits on the Academic Advisory Group of the Bank of England’s Fair and Effective Markets Review.

“Questions will be asked as to why no CEO or senior figure has resigned at any of these banks as the size of this fine and the investigations so far have revealed the rigging of FOREX was part of the culture of these banks,” he said.

The revelation that traders colluded to move around currency exchange rates was particularly embarrassing for the banks because it occurred after they had paid billions of dollars to settle claims that their traders had tried to rig interbank lending rates. It has raised questions as to whether the industry learnt any lessons from the previous scandal.