RBS, HSBC, Citibank, JP Morgan Chase and UBS hit with £2bn in fines over foreign exchange rigging
- Credit: PA
Five banks have been fined more than £2billion by regulators on either side of the Atlantic after a probe into traders rigging the £3trillion-a-day foreign exchange (forex) market.
Royal Bank of Scotland, HSBC, Citibank, JP Morgan Chase and UBS were handed penalties totalling a record £1.1bn by Britain’s Financial Conduct Authority (FCA) and 1.5bn US dollars (£927million) by US authorities.
Investigators found traders from different firms formed groups using code names such as “the 3 musketeers” and “the A-team” to manipulate currency exchange rates to profit the banks at the expense of clients.
The FCA found that failure by the banks to control business practices undermined confidence in UK financial markets and put its integrity at risk, with 40% of forex trading taking place in London.
It said they had failed to act despite the previous scandal over the manipulation of the benchmark Libor interbank lending rate which had resulted in billions of pounds worth of fines.
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The Bank of England was dragged into the scandal amid claims officials knew about the practice. A review today found while none were aware of “improper conduct”, one member of staff failed to raise the alarm about traders sharing information.
It said that its chief foreign exchange dealer, who was suspended in March, had been fired yesterday for “a failure to adhere to internal policies” but said it was “not at all related” to the forex probe.
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FCA chief executive Martin Wheatley said: “Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right. They must make sure their traders do not game the system to boost profits.”
The fines from the UK regulator dwarf its previous total penalties of £532m for the Libor scandal and also set new records for its fines for individual banks, with the previous highest being £160m.
Royal Bank of Scotland, which is 80% owned by the taxpayer, was fined a total of £399m including £217m by the FCA and 290m US dollars (£182m) by the US Commodity Futures Trading Commission (CFTC).
RBS said it had placed six individuals into a disciplinary process, three of whom were currently suspended, pending further investigation. It said it would make a statement about the probe by the end of the year.
Chairman Sir Philip Hampton said: “The RBS board fully accepts the criticisms within today’s announcements and condemns the actions of those employees responsible for this misconduct.”
Chief executive Ross McEwan said: “To say that I am angry about the misconduct would be an understatement. We had people working at this bank who did not know the difference between right and wrong, or worse, didn’t care bout the distinction.”
He added that those responsible would have bonuses clawed back or face disciplinary procedures. The bank said six were undergoing a disciplinary process, with three suspended. A statement about the probe will follow by the end of the year.
The bank, which has analysed millions of documents, said it was reviewing the conduct of more than 50 current and former members of trading staff around the world as well as dozens of supervisors and senior management.
HSBC was fined £389m including £216m from the FCA and £173m from the CFTC.
However Barclays, the third British bank expected to be fined, said it was “in the interests of the company to seek a more general coordinated settlement” with more investigations from other authorities still to come.
It recently said it was setting aside £500m to cover probes into the scandal.
Other bodies investigating the affair include Britain’s Serious Fraud Office and the US Department of Justice.
Swiss bank UBS was fined a total of £503m including £234m by the FCA, 290m US dollars (£182m) by the CFTC and 134m Swiss francs (£87m) by the Swiss regulator FINMA.
America’s Citibank was hit with penalties of £420m including just under £225.6m from the FCA and 310m US dollars (£194.6m) from the CFTC.
JP Morgan Chase was fined £417m including £222m by the UK regulator and 310m dollars (£195m) from the CFTC.
Chancellor George Osborne said: “Today we take tough action to clean up corruption by a few so that we have a financial system that works for everyone.
“A number of traders have been suspended or fired, and the Serious Fraud Office are conducting criminal investigations. The banks that employed them face big fines - and I will ensure that these fines are used for the wider public good.”
Fines collected by the FCA for the Libor scandal in the past have been passed on to charities including military causes.
The Bank of England’s review, carried out by Lord Grabiner, extracted and applied search terms to 1.8m documents and reviewed nearly 66,000 documents and 87,000 telephone calls.
It found that no official was involved in any unlawful or improper behaviour in the forex market.
However one member of staff was aware that bank traders were sharing information about client orders for the purpose of “matching” - a practice that can increase the potential for improper conduct - but did not raise the alarm to superiors.