Six Major Banks fined 5.7 billion US dollars on Forex Benchmark Rates manipulation charges

May 21, 2015 14:00 IST

Foreign Exchange Benchmark RatesSix of the world’s biggest banks were on 20 May 2015 fined 5.7 billion US dollars on Foreign Exchange Benchmark Rates manipulation charges by various authorities in the USA and the UK’s Financial Conduct Authority.

The fines were imposed on Citicorp, JPMorgan Chase & Co., Barclays Plc, Royal Bank of Scotland Plc, UBS Group AG and Bank of America Corp. as part of the settlements they reached with the government agencies in which they pleaded guilty to the charges under the Anti Trust laws and agreed to pay fines.

As part of the settlement with the US Justice Department the four banks viz., Citicorp, JPMorgan Chase & Co., Barclays Plc and Royal Bank of Scotland Plc agreed to plead guilty to felony charges of conspiring to manipulate the price of US dollars and euros in the Forex Spot Market. However, UBS Group AG of Switzerland, the first to cooperate with antitrust investigators, was granted immunity from the charges.

Two banks- Deutsche Bank AG and HSBC Holdings Plc are still under investigation facing similar charges.

How the currency markets were manipulated?

The banks benefitted by influencing global foreign exchange bench mark rates by aligning positions and pushing transactions through at the same time. They formed a cartel for this purpose and used online chat rooms to discuss their positions before the rates were set and suppress competition in the market. The severity of this illegal practice is compounded by the fact the four banks which pleaded guilty to charges have major stakes in the 5 trillion US dollars per a day world’s Forex market.

Fines imposed by various authorities

By the Anti Trust division of US Justice Department: Citicorp parent Citigroup Inc. will pay 925 million US dollars, the highest of the banks penalized. Barclays, JPMorgan and Royal Bank of Scotland Group Plc agreed to pay 650 million, 550 million and 395 million US dollars respectively as fines.

By The Federal Reserve System: The country’s banking regulator imposed fines of more than 1.6 billion US dollars collectively on the five banks for unsafe and unsound practices. Besides, Bank of America Corp. was imposed a fine of 205 million US dollars for failing to detect and address conduct by traders who discussed the possibility of entering into agreements to manipulate currency prices.

BY DFS, CFTC, etc: As part of a settlement the London-based Barclays will pay  1.3 billion US dollars to the New York Department of Financial Services (DFS), the Commodity Futures Trading Commission (CFTC) and the UK’s Financial Conduct Authority. The bank also agreed to terminate the services of eight employees engaged in currency trading between London and New York.

The recent settlements bring the total fines and penalties paid by the five banks, excluding the Bank of America, to resolve the two-year old currency investigations to about 9 billion US dollars. In November 2014, the financial market regulators of USA and the UK imposed fines up to 3.4 billion US dollars on them.

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