Five banks fined over $3bn in foreign exchange probe

Traders were found to have attempted to rig key forex benchmarks over a period of almost six years. (Image copyright: 1000 Words| Shutterstock.com)

Regulators in the U.K., U.S. and Switzerland imposed penalties of $3.2 billion Wednesday on five banks they said failed to stop traders from trying to manipulate the $5.3-trillion-a-day foreign exchange currency-trading market.

The settlement, which follows a year-long global probe into claims the exchange market was being rigged, established that overseas traders used private Internet chat rooms to share tips about the activities of their firms’ clients.

It also said that banks and other financial firms’ representatives colluded on strategies to try to manipulate exchange rates for pairs of leading world currencies such as the euro and U.S. dollar and the U.S. dollar and the Japanese yen.

The U.K’s Financial Conduct Authority (FCA) said in a statement it has fined JPMorgan Chase $352 million, Citibank $358 million, HSBC $343 million, the Royal Bank of Scotland $344 million and UBS $371 million.

According to the authority, the “tight knit groups” formed by traders at the different banks had described themselves as “the 3 musketeers”, “the A-team” and “1 team, 1 dream”.

The Commodity Futures Trading Commission (CFTC) announced it has imposed more than $1.4 billion in penalties — $310 million each for Citibank and JPMorgan, $290 million each for RBS and UBS, and $275 million for HSBC.

CFTC’s examples of misconduct in private chat rooms

Swiss regulator FINMA ordered UBS (NYSE:UBS), the world’s largest private bank, to pay $139 million, but did not say anything about the ongoing probe into allegations of misconduct at the bank’s precious metals trading business.

But the bank did pay a lot — it received the highest single penalty imposed by the FCA. All of the fines were above $300m, which make them the highest FCA penalties ever levied, breaking the record previously held by UBS, which paid $253m to the FCA in 2012 over libor rigging.

Barclays, which was included in the investigation and had been expected to announce a similar deal to the other banks, said it would not be settling at this time.

“After discussions with other regulators and authorities, we have concluded that it is in the interests of the company to seek a more general coordinated settlement,” it said in a statement.

The Royal Bank of Scotland is, according to Business Insider,  the first bank that besides paying the imposed fines has revealed it is reviewing the conduct of some staffers still at the bank, with 50 former and current employees under investigation.

Several senior traders at the banks have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme.

Bank of England fires chief currency dealer

In parallel the Bank of England published an independent report by Lord Grabiner this morning, revealing to what extent Bank officials knew about the scandal.

The document followed the dismissal announcement of BoE’s chief currency dealer Martin Mallet, who worked at the lender for 30 years, and was suspended in March.

The bank denied the firing was related to the report’s findings. Instead it said it stemmed from “information that was discovered during the course of the investigation”.