Forex probe results in $6bn fines

Four major banks have pleaded guilty to trying to manipulate foreign exchange rates and six banks were fined nearly $6 billion (€5.4bn) in a settlement that substantially ends a global probe into misconduct in the $5-trillion-a-day market.

Authorities in the US and Europe fined seven banks over $10bn for failing to stop forex traders from sharing confidential information about client orders and co-ordinating trades to boost their own profits.

Traders at Citigroup, JP Morgan, Barclays, and Royal Bank of Scotland, who described themselves as “The Cartel”, used an invitation-only electronic chatroom and coded language to manipulate the price of US dollars and euro between December 2007 and January 2013, according to US authorities. The four banks pleaded guilty to conspiring to manipulate the foreign exchange market.

The misconduct occurred after regulators had started punishing banks for rigging the London interbank offered rate (Libor), an interest rate benchmark. Barclays faced the biggest fine with a penalty of $2.4bn because it did not join in an earlier November settlement with British and some US authorities.

Barclays — which had set aside $3.2bn to cover any forex-related settlement —fired eight employees as part of its settlement and New York’s Superintendent of Financial Services warned it was still probing the bank’s use of electronic systems for foreign exchange trading, which make up the vast majority of transactions in the market. Swiss bank UBS, which avoided a guilty plea, pleaded guilty instead to one count of wire fraud and will pay a $203m fine for its role in rigging Libor. Switzerland’s largest bank also had to pay $342m to the Federal Reserve over attempted manipulation of forex rates.

The US central bank fined six banks, including a $205m fine for Bank of America, which, like UBS, avoided a guilty plea.

Reuters