Banks fined over $3 billion in foreign exchange probe – USA TODAY
Regulators in the U.K., U.S. and Switzerland imposed civil penalties of over $3 billion Wednesday on banks suspected of manipulating the $5.3-trillion-a-day foreign exchange currency-trading market.
The U.K’s Financial Conduct Authority (FCA) announced it had fined JPMorgan Chase $352 million, Citibank $358 million, HSBC $343 million, the Royal Bank of Scotland $344 million and UBS $371 million.
The Commodity Futures Trading Commission said it had imposed more than $1.4 billion in penalties – $310 million each for Citibank and JPMorgan, $290 million each for the RBS and UBS, and $275 million for HSBC.
Swiss regulator FINMA ordered UBS to pay $139 million (134 million Swiss francs).
The Wall Street Journal said Barclays PLC, which had been in late-stage settlement talks, pulled out at the last minute.
The bank told the WSJ in a statement that it had engaged with regulators and considered a settlement on “closely similar terms” to those announced on Wednesday but that after discussions with other regulators and authorities it had decided to seek a “more general coordinated settlement.”
The FCA said it would progress its investigation into the firm, and added that it was launching an industry-wide remediation programme to ensure companies address the root causes of the failing and drive up standards.
It said the fines were the largest it, or its predecessor the Financial Services Authority,had ever imposed.
Aitan Goelman, the CFTC’s Director of Enforcement, said: “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, and this reliance is premised on faith in the fundamental integrity of these benchmarks.
“The market only works if people have confidence that the process of setting these benchmarks is fair, not corrupted by manipulation by some of the biggest banks in the world.”
Probes began in mid-2013 over the largely unregulated foreign currency market. Investigators have been examining evidence that traders at several major banks manipulated rates for some of the 160 world currencies that have been calculated and distributed by a joint venture of the WM Co. and Thomson Reuters.
FCA Chief Executive Martin Wheatley told a parliamentary committee hearing in February that evidence of foreign exchange wrongdoing was “every bit as bad” as findings that bank traders had manipulated the London Interbank Offered Rate, or Libor, the international benchmark used to set rates on trillions of dollars in loans, mortgages, credit cards and some derivatives.
Several dozen traders have either been placed on leave or terminated during the investigations, according to numerous media reports.
Other foreign-exchange investigations by additional enforcement agencies and regulators remain pending. JPMorgan Chase confirmed in a Nov. 3 quarterly filing that the New York-based bank was in talks with the U.S. Department of Justice over a criminal investigation of its foreign exchange business.
The probes focus on JPMorgan’s foreign exchange spot trading, as well as its internal controls and supervision of the trading, the bank said.
The New York State Department of Financial Services is conducting a foreign exchange probe.
Several U.S. banks signaled the likelihood of costly settlements in a recent announcements to shareholders.
Bank of America (BAC) recorded a $400 million non-deductible charge on Nov. 6. The nation’s second-largest bank by assets also adjusted its third-quarter financial results to a net loss of $232 million, equivalent to a 4-cent loss on a per-share basis.
The Charlotte, N.C.-based bank said the moves came in response to “advanced discussions with certain U.S. banking regulatory agencies to resolve matters related to its foreign exchange business.”
Similarly, Citigroup surprised investors on Oct. 30 by cutting the New York-based bank’s third-quarter earnings by $600 million to help fund an increased allowance for legal expenses believed linked to the foreign currency investigations.