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Big fines for top banks over foreign exchange market manipulation


Big fines for top banks over foreign exchange market manipulation


In the latest banking scandal five leading banks have been fined after it was found some foreign currency dealers had broken the rules for years by coordinating their trades and shared confidential information about client orders.

They did that to make money from rigging a key foreign exchange benchmark.

Regulators in Britain, the United States and Switzerland have ordered UBS, Citigroup JP Morgan, Royal Bank of Scotland and HSBC to pay a total of 2.72 billion euros.

Martin Wheatley, Chief Executive of Britain’s Financial Conduct Authority, said: “The traders put their own interests ahead of their customers’, they manipulated the market, or attempted to manipulate the market and abused the trust, I think, of the public and certainly us as regulators. The banks’ failures to establish adequate systems and controls are what allowed the traders to manipulate the fixed rates across the world’s largest currencies, and failings like this seriously undermine confidence in the market and undermine the attempts to genuinely reform banking culture.”

The agreed settlement which led to the fines did not include Barclays, which said it is negotiating separately with regulators.

There could also be more penalties for all the banks from the US Department of Justice and New York’s Department of Financial Services.

Bank customers who believe they lost out because of the manipulation may also launch civil law suits.

How it was done

Regulators found evidence that traders had colluded to try and manipulate benchmark foreign exchange rates by sharing confidential information about client orders with one another right up until October 2013.

That was more than a year after US and British authorities started punishing banks for rigging the London interbank offered rate or Libor, an interest rate benchmark.

The traders used code names to identify clients without naming them and created online chatrooms with names such as ‘the players’, ‘the 3 musketeers’ and ’1 team, 1 dream’ in which to swap information.

Dozens of dealers have been suspended or fired.

The regulators found that between January 1, 2008 and October 15, 2013, the five banks failed to adequately train and supervise foreign currency traders.

Big bucks

Some 5.3 trillion US dollars (4.25 trillion euros) change hands every day on the global foreign exchange market, with 40 percent of trades occurring in London.

Currencies including dollars, pounds, euros and yen trade in the loosely regulated market which is dominated by a group of elite banks.

But those trades have an even wider impact because companies around the world use market prices to value assets and manage currency risks.

with Reuters and AP

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