US and British regulators fined six major global banks nearly $6 billion Wednesday for rigging the foreign exchange market and Libor interest rates. The far-flung settlement included guilty pleas from Barclays Bank, JPMorgan Chase, Citicorp and the Royal Bank of Scotland for conspiring to manipulate the massive currency market, as well as a guilty plea from Switzerland's UBS, for violating a prior settlement of Libor charges.
These five banks agreed to a record $2.5 billion in criminal penalties, the largest set of antitrust fines ever obtained by the Department of Justice. All five, plus the Bank of America, will also pay more than $1.8 billion in fines to the US Federal Reserve over "unsafe and unsound practices" in forex markets.
The massive settlement addresses what regulators described as a brazen scheme by financial heavyweights to orchestrate trades in the $5.3-trillion-per-day global foreign exchange market in ways that cheated clients and bolstered their own profits. Traders from the banks, communicating in a chat room referred to as "the Cartel", agreed to withhold bids or offers for euros or dollars at distinct times to protect each other's trading positions, the Justice Department said. The bank's chat room nickname "aptly describes the brazenly illegal behaviour they were engaged in on a near-daily basis," said US Attorney General Loretta Lynch.
"They acted as partners - rather than competitors - in an effort to push the exchange rate in directions favourable to their banks but detrimental to many others," she said. "And their actions inflated the banks' profits while harming countless consumers, investors and institutions around the globe." Wednesday's settlement follows earlier agreements between large banks and global regulators in a massive global probe into rigging foreign exchange trading that has ensnared most large banks and resulted in numerous firings and suspensions of individual traders.
Banks have now agreed to nearly $9 billion in fines for manipulating forex rates, Justice said. The size of penalties on individual banks Thursday ranged from the hundreds of millions of dollars to $2.4 billion for British bank Barclays, depending on a bank's involvement in the scheme and whether it had joined an earlier settlement with some regulators late last year. The Barclays sum was high because it had not participated in the earlier deal. "Put simply, Barclays employees helped rig the foreign exchange market," said Benjamin Lawsky, the head of the Department of Financial Services for New York State.
"They engaged in a brazen 'heads I win, tails you lose' scheme to rip off their clients.' Barclays chief executive Antony Jenkins said he regretted that "some individuals" within the bank "have once more brought our company and industry into disrepute." "This demonstrates again the importance of our continuing work to build a values-based culture and strengthen our control environment," he said.
In Wednesday's deals, in addition to forex-manipulation charges, both Barclays and UBS were fined for violating a 2012 settlement for conspiring to rig Libor, the global commercial interest rate benchmark used to peg millions of rate-sensitive contracts and loans around the world. UBS said that it will plead guilty to fraud in the US over the Libor interest rate-rigging scandal and pay $203 million in fresh fines. The Justice Department granted the Swiss bank conditional immunity in its foreign exchange probe for co-operating with the investigation. However, Justice demanded the guilty plea on Libor after concluding UBS's role in foreign exchange breached its 2012 non-prosecution agreement on Libor.
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