Barclays and RBS among banks fined $5.7bn over foreign exchange market riggingComments Off on Barclays and RBS among banks fined $5.7bn over foreign exchange market rigging
The settlement, which also involved US banks JP Morgan, Bank of America and Citi, as well as Switzerland’s UBS, means banks have handed authorities around $10 billion to deal with the scandal.
Barclays, Citi, JPMorgan and RBS also all pleaded guilty to a US antitrust violation.
The affair follows a series of scandals, including the fixing of benchmark interest rate Libor, that have severely damaged the public’s perception of the banking industry.
FX traders were said to have come together in chatrooms with names like “The Cartel” or “The Bandits Club” to organise methods to influence the value of major currencies in the hope of inflating their profits.
“If you aint cheating, you aint trying,” one Barclays trader said in a chatroom.
Clients – anyone from hedge funds betting on the market or companies engaging in a major overseas transaction – could have been affected by the activity.
“This sort of practice strikes at the heart of business ethics and is yet another blow to the integrity of the banks. Our pension funds invest billions of pounds in the financial markets and if they are being cheated in this way it affects every one of us,” said Mark Taylor, Dean of Warwick Business School and a former foreign exchange trader.
Read more: How did banks rig foreign exchange markets?
Barclays, which opted out of a mass settlement last year that saw six banks agree to pay a total of £2.6 billion in fines, was fined the largest amount at £1.53 billion.
That included City watchdog the Financial Conduct Authority’s largest ever financial penalty of £284.4 million.
The FCA said the British bank had failed “to control business practices in its foreign exchange (FX) business in London”.
It said the failings occurred “throughout Barclays’ London voice trading FX business, extending beyond G10 spot FX trading into emerging markets spot FX trading, options and sales, undermining confidence in the UK financial system and putting its integrity at risk”.
Georgina Philippou, the FCA’s acting director of enforcement and market oversight added: “Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm’s interests ahead of those of its clients.”
The bank, which had already set aside around £2 billion to cover its bill for the issue, also settled with the US Commodity Futures Trading Commission, the New York State Department of Financial Services, the US Department of Justice and the Board of Governors of the Federal Reserve System.
Benjamin Lawsky Superintendent of Financial Services for New York State said: “Put simply, Barclays employees helped rig the foreign exchange market. They engaged in a brazen ‘heads I win, tails you lose’ scheme to rip off their clients.”
Part of Barclays’ payment also went towards settling claims related to the ISDAfix benchmark – a reference point for derivatives.
Barclays boss Antony Jenkins said: “The misconduct at the core of these investigations is wholly incompatible with Barclays’ purpose and values and we deeply regret that it occurred.”
“I share the frustration of shareholders and colleagues that some individuals have once more brought our company and industry into disrepute.
“Dealing with these issues, including taking the appropriate disciplinary action against the individuals involved, is a necessary and important part of our plan to transform Barclays and remains a key priority.”
Frustration: Barclays boss Antony Jenkins (Picture: Daniel Hambury, Stella Pictures)
Unlike with UBS, which announced earlier that it had paid $545 million (£350.7 million) for misconduct relating to FX markets and Libor, the DoJ did not rule that Barclays had violated a Non-Prosecution Agreement.
An NPA usually allows a degree of immunity if a company blew the whistle on wrongdoing.
Robin Henry at law firm Collyer Bristow said that the bank could face legal action from clients who lost out as a result of the scandal.
“Potential claimants could be pension funds and investment managers, who have regular currency dealings with banks in large volumes and UK businesses who were missold highly complicated forex derivatives by banks in order to manage their exposure to foreign currency.
“Small changes in forex rates can trigger massive liabilities for businesses. These fines mean that claimants now have further evidence of forex manipulation and may be able to reclaim their losses from the banks.”
RBS was part of November’s settlement but today said it will pay another $669 million to the DoJ and Federal Reserve to resolve the investigations.
“We strongly condemn the actions of those responsible and regret the control failings that allowed such misconduct to take place,” RBS chairman Philip Hampton said.
Around 40 foreign exchange staff at banks have been suspended, put on leave or fired due to their involvement in market manipulation. Barclays fired another eight employees as part of its settlement.
A former RBS trader was arrested in December as part of the Serious Fraud Office’s criminal investigation of the allegations.