Following a global investigation that took one year to finish, regulators imposed fines totaling to $4.3 billion (2.73 pounds) on six major banks for their failure to stop traders from manipulating the foreign exchange market.
Foreign Exchange Trading
Bank of America Corp, Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co, Royal Bank of Scotland Group Plc, and UBS AG are all facing penalties from the inquiry. The investigation has put the largely-unregulated market, worth at least $5 trillion a day, on a tighter leash. It also gave boosted the push to automate trading and ensnared the Bank of England.
Regulators said the dealers colluded and shared confidential information about client orders and coordinated trades to boost profits. The ForEx benchmark the group allegedly manipulated is used by corporate treasurers and asset managers as a means to value their holdings.
According to authorities, dealers used code names for clients to avoid naming them. Information exchange happened in online chatrooms under pseudonyms such as “the players,” “the 3 musketeers” and “1 team, 1 dream.” In the chatrooms, users who were not involved were belittled, and the traders would use obscene language to congratulate themselves on the quick profits made from their collusions, authorities said.
6 Banks, $4.3 Billion
The Citigroup Inc. and JPMorgan Chase & Co will take the brunt of the penalties, with both institutions agreeing to pay more than $1 billion each. Citigroup will pay $1.02 billion, to be divided among three regulators: the Financial Conduct Authority (FCA) in the UK, the US Commodity Futures Trading Commission (CFTC), and the US Office of the Comptroller of the Currency (OCC). JPMorgan will pay $1.01 billion to the same three regulators.
UBS AG agreed to pay $0.80 billion to the FCA, the CFTC, and the Swiss Financial Market Supervisory Authority (FINMA). The Royal Bank of Scotland was fined $0.63 billion imposed by the FCA and CFTC; HSBC with a $0.63 billion fine by the FCA and CFTC; and $0.25 billion for the Bank of America for the OCC.
The banks didn’t dispute the findings and penalties imposed by the regulators.
Stricter Trading Regulations Enforcement
“Today’s record fines mark the gravity of the failings we found, and firms need to take responsibility for putting it right,” said FCA Chief Executive Officer Martin Wheatley.
He said bank managers need to be stricter in implementing compliance policies and that they need to keep a closer eye on their traders, instead of just leaving it to compliance departments.
The probe already triggered several major changes in the industry, such as the firing of numerous traders. In the US, which is known to be more aggressive towards such wrongdoings, the Department of Justice, the Federal Reserve, and New York’s financial regulator are still investigating banks in their jurisdiction over foreign exchange trading.