Newspaper article International New York Times

$4.25 Billion in Fines for Currency Fraud ; 5 Big Banks Are Penalized after Traders Manipulated Foreign Exchange Rates

Newspaper article International New York Times

$4.25 Billion in Fines for Currency Fraud ; 5 Big Banks Are Penalized after Traders Manipulated Foreign Exchange Rates

Article excerpt

The fines, large by European standards, come as regulators focus even more closely on problems in the financial industry.

The traders called themselves the "A-team" and "the 3 musketeers" among other roguish labels as they colluded by manipulating benchmark foreign-exchange currency rates.

Sometimes they made a profit of a half-million dollars for their banks in a single series of trades.

Those were among the revelations in documents released on Wednesday by British, American and Swiss regulators as they fined a group of the world's biggest banks a total of $4.25 billion for rigging the foreign currency markets.

Criminal charges may still await the banks and some other big financial institutions still under investigation for what regulators say was an effort to manipulate exchange rates in the approximately $5.3 trillion in foreign currencies traded each day -- the world's single biggest financial market.

The Financial Conduct Authority in Britain said on Wednesday said it had reached a so-called global settlement worth a combined 1.1 billion pounds, or more than $1.7 billion, with five companies: the Swiss bank UBS; the British lenders HSBC and Royal Bank of Scotland; and the American banks JPMorgan Chase and Citigroup. The settlement is large by European standards, and it is a record for the British financial authority.

Also on Wednesday, in coordination with the British regulators, the Commodity Futures Trading Commission in the United States imposed $1.4 billion in penalties against Citigroup, HSBC, JPMorgan, R.B.S. and UBS. In Switzerland, regulators penalized UBS about $138 million.

The Office of the Comptroller of the Currency also fined Citigroup, JPMorgan and Bank of America a combined $950 million for what it said were "unsafe and unsound practices" in their currency trading businesses.

The fines will barely dent the balance sheets of the banks involved, most of which had already set aside money in anticipation of a settlement. But the episode is the latest setback for a financial industry under increasing scrutiny and growing legal costs for its past sins. The fines come as regulators on both sides of the Atlantic are still trying to clean up a business culture in the financial industry that they say had, at times, encouraged improper employee conduct.

After the settlements were announced, the Financial Conduct Authority said the British bank Barclays, which decided at the last minute not to take part in the settlement, was the only lender still under scrutiny in its inquiry and would be the only bank likely to face a future penalty by the regulator.

That was surprise because many observers had expected the British authority to also examine other large banks in the foreign exchange market. Barclays said in a statement on Wednesday, "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."

One of the biggest banks let off the hook was Deutsche Bank, although it is still under investigation from other authorities, including the commodities commission and the Department of Justice in the United States.

On Wednesday, the banks that paid fines condemned the activity highlighted in the settlements and noted that changes had already been put in place.

From January 2008 to October 2013, the British financial authority said, the banks that were fined on Wednesday had allowed traders in the foreign exchange markets to put the interests of their banks ahead of those of their clients, of other market participants and of the wider British financial system. That included sharing confidential client information and attempts to manipulate currency rates by colluding with traders at other companies.

The British and American regulators released documents detailing conversations among traders in electronic chat rooms, replete with jargon and typos. …

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