Banks fined $4.3B in foreign exchange probe

by **Ponee** Wed Nov 12, 2014 1:33 pm

Six big banks agreed Wednesday to pay $4.3 billion to settle allegations from regulators in the U.S., Great Britain and Switzerland that they attempted to manipulate the world's $5.3-trillion-a-day foreign exchange currency-trading market.

Traders from JPMorgan Chase (JPM), Citigroup (C), HSBC (HSBC), Royal Bank of Scotland (RBS), UBS (UBS) and Bank of America (BAC) shared information about the foreign exchange trading activities of their firms' clients and colluded on strategies aimed at manipulating benchmark exchange rates for pairs of leading world currencies such as the British pound and U.S. dollar and the U.S. dollar and Japanese yen, regulators said.

According to the regulators, traders at different banks shared information about client activity by using code names to identify clients without naming them. The code names included "the players," "the 3 musketeers," "1 team, 1 dream," "a co-operative" and "the A-team."

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The fines were announced by two U.S. regulators — the Commodity Futures Trading Commission and the Office of the Comptroller of the Currency — Britain's Financial Conduct Authority, and Swiss financial regulator FINMA.

JPMorgan and Citi received the heaviest penalties — more than $1 billion each in total. UBS' fines total $800 million while RBS will pay $634 million and HSBC, $618 million. Bank of America, which was only fined by the OCC on Wednesday, is paying $250 million.

Barclays (BCS) also had been expected to be among the banks penalized in the latest major scandal involving global benchmarks to rock the financial world. But the London-based bank withdrew from settlement talks. Barclays issued a statement saying it considered a deal on "closely similar terms" to the announcements but ultimately decided to seek "a more general coordinated settlement."

The announcement signal the end of the first phase of continuing investigations on both sides of the Atlantic. The U.S. Department of Justice is pursuing a separate criminal investigation of suspected foreign-exchange trading wrongdoing. And FINMA recently warned present and former employees of UBS they could face individual charges.

The FCA said it would continue its investigation into Barclays, and added that it was launching an industry-wide remediation program to ensure companies address the root causes of the failing and drive up standards.

According to the British regulator, bank traders shared confidential client information and attempted to manipulate spot foreign exchange rates for 10 major currencies. Between January 2008 and October 2013, they colluded with traders at other firms "in a way that could disadvantage those clients and the market," the FCA said.

Excerpts of chat room exchanges released by the CFTC shows bank traders colluding to push foreign exchange rates up or down at the daily 4 p.m. London time "fix" that sets the benchmarks for major world currencies.

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."

Comptroller of the Currency Thomas Curry said the regulators expect national banks "to have controls in place that are sufficiently robust to ensure that employees will follow the law and adhere to the highest standards of conduct."

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 leading world currenciessome 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.

USA TODAY

Probe targets rigging in $5.3T currency market

Jane Onyanga-Omara and Kevin McCoy, USA TODAY 11:25 a.m. EST November 12, 2014
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