Wednesday 13 November 2019

Banks hit by record €5bn fine for rigging currency exchange markets

A teller counts US dollars at a money change Credit: Nyimas Laula
A teller counts US dollars at a money change Credit: Nyimas Laula

Karen Freifeld, Steve Slater and Katharina Bart

Six of the world's largest banks are to pay fines totalling €5.1 billion for manipulating the foreign exchange market.

Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates (forex), and six banks have agreed to a €5.1 billion ($5.7bn) settlement following a global probe into misconduct in the €4 trillion a day market.

Traders at Citigroup, JP Morgan, Barclays and Royal Bank of Scotland, who described themselves as "The Cartel", used an invitation-only electronic chat room to manipulate the price of US dollars and euros between December 2007 and January 2013, according to US authorities.

Transcripts of online chat rooms made public on Wednesday demonstrated the clubby, audacious nature of the dealing desks with one employee at Barclays remarking, "If you aint cheating, you aint trying."

The four banks pleaded guilty to conspiring to manipulate the foreign exchange market.

The misconduct occurred after regulators started punishing banks for rigging the London interbank offered rate (Libor), an interest rate benchmark.

Britain's Barclays faced the biggest fine with a penalty of €1.9 billion because it did not join in an earlier November settlement with British and some US authorities.

Barclays fired eight employees as part of its settlement and New York's Superintendent of Financial Services warned that it was still probing the bank's use of electronic systems for foreign exchange trading, which make up the vast majority of transactions in the market.

"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," Benjamin Lawsky said in a statement.

"While today's action concerns misconduct in spot trading, there is additional work ahead."

Shares in the bank rose more than two percent following news of the settlement.

Authorities in the United States and Europe have fined seven banks over €9.2 billion for failing to stop their traders from sharing confidential information about client orders and coordinating trades to boost their own profits.

The global investigation into manipulation of foreign exchange rates has put the largely unregulated forex market on a tighter leash and accelerated a push to automate trading.

Authorities in South Africa announced this week they were opening their own probe.


Also in Business