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Global Banks to Pay $91M in Settlement for FX Manipulation

Zacks Equity Research

Following a global investigation by the U.S., British, Swiss and European Union (EU) regulators into the alleged foreign exchange market manipulation, five major global banks have been imposed a fine of around 90 million Swiss francs ($91 million), this time by Switzerland’s Competition Commission (COMCO). The news was reported by Bloomberg. These banks have been accused of rigging prices in the $5.1 trillion-a-day foreign exchange market.

Barclays PLC BCS, Citigroup C, JPMorgan JPM, Mitsubishi UFJ Financial Group, Inc. MUFG and Royal Bank of Scotland RBS are the accused banks. Among these, Citigroup has been hit the hardest, with a penalty of 28.5 million francs. RBS has been fined 22.5 million francs, JPMorgan 9.5 million francs, while Barclays will pay 27 million francs and MUFG around 1.5 million francs.

Switzerland’s COMCO noted that the sanctioned banks “have committed not to conclude such agreements in the future.”

Notably, Swiss bank UBS Group AG UBS escaped penalty as it informed the authorities about the cartels. Meanwhile, another global major bank, Credit Suisse CS is in full cooperation with COMCO’s investigation and “intends to vigorously contest the substance of the allegations,” the bank said. “A number of other regulators have concluded their FX-related inquiries without taking any enforcement action against Credit Suisse,” the bank further added.

Notably, per Olivier Schaller, Comco’s deputy director, Bank Julius Bar & Co. AG and Zurcher Kantonalbank have been deprived off any wrongdoings.

Though the COMCO has been sluggish in its investigation, global major banks have already been slapped with penalties of $10 billion by the U.S., U.K. and EU regulators. Notably, after years of investigation, the Swiss regulators neared conclusion of the investigation for rigging prices.

Also, these global banks have been imposed a fine of around €1.07 billion ($1.2 billion) by the EU antitrust regulators into forex collusion, last month.

Probes & Allegations

Per the Swiss regulators, individual traders of the accused banks led the formation of two cartels for manipulating the spot foreign exchange market for 11 currencies, which included the dollar, the euro and the pound.

Per the accusations, traders colluded to set up chat rooms such as “Essex Express”. Moreover, knowing each other on personal basis, they colluded in Bloomberg chatrooms with names such as Three Way Banana Split. The traders’ exchanging of information on their risk positions, sharing confidential data in the currency market pertaining to spot and future trades, as well as those related to volume of deal flow, and sometimes synchronizing their trading strategies occurred between 2007 and 2013.

Currency market rigging is not new in the banking industry. Previously, some big banks were penalized for rigging LIBOR — a benchmark for credit card rates and other loans.

Globally, banks have faced more than $200 billion in penalties in recent years, following investigations into their shoddy malpractices, including interest-rate manipulation, violation of agreements and inadequate selling of a number of financial products.

Conclusion

Regulatory authorities are further investigating scandals related to foreign-exchange rate fixing, and are determined to put forward a landmark judgment to terminate such practices in the future, bring justice to sufferers, and punish wrongdoers. While settlement of such issues will put to rest a long-drawn investigation and bring reprieve to the banks, this comes as a huge blow to their financials.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
Royal Bank Scotland PLC (The) (RBS) : Free Stock Analysis Report
 
Barclays PLC (BCS) : Free Stock Analysis Report
 
Credit Suisse Group (CS) : Free Stock Analysis Report
 
UBS Group AG (UBS) : Free Stock Analysis Report
 
Mitsubishi UFJ Financial Group, Inc. (MUFG) : Free Stock Analysis Report
 
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