US, British and Swiss regulators yesterday said they had fined five global banks more than US$3 billion for attempted manipulation of foreign exchange markets.
The US Commodity Futures Trading Commission (CFTC), the UK Financial Conduct Authority (FCA) and the Swiss Supervisory Markets Authority said that they had fined Citibank Inc, JPMorgan Chase Bank, Royal Bank of Scotland, HSBC and UBS AG a total of US$3.4 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 benchmark rates to benefit the positions of certain traders.”
Photo: Reuter
“Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right,” FCA chief executive Martin Wheatley said. “They must make sure their traders do not game the system to boost profits.”
About US$5.3 trillion changes hands every day on the global foreign exchange market, with 40 percent of trades occurring in London. Dollars, euros and yen are traded in the loosely regulated market dominated by a group of elite banks.
However, those trades have 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 last year, traders at the five banks formed groups that shared information about client activity. These groups used 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 Swiss Supervisory Markets Authority also ordered Switzerland’s largest bank to automate at least 95 percent of its global foreign exchange trading and limit bonuses for traders of foreign exchange and precious metals, where it said it had also found evidence of serious misconduct, to 200 percent of their base salary for two years.
Other bank employees who earn more than 200 percent of their base salary in bonuses will have to undergo an approval process.
The Swiss regulator has started enforcement proceedings against 11 former and current employees of UBS.
Barclays PLC, a major player in the foreign-exchange market, had been expected to be part of the settlement, but the FCA said its investigation into the UK bank was continuing.
Barclays said it is not ready to reach an agreement with regulators in a global currency rigging investigation.
“After discussions with other regulators and authorities, we have concluded that it’s in the interests of the company to seek a more general coordinated settlement,” the London-based bank said in an e-mailed statement.
Barclays, led by Antony Jenkins, said it considered a settlement with FCA and CFTC “on closely similar terms to those announced” yesterday. The bank set aside £500 million (US$16.3 million) in the third quarter to settle a currency probe.
Additional reporting by Reuters and Bloomberg
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