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FCA hits banks with largest ever fine over FX failures

  • 12/11/2014
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The Financial Conduct Authority (FCA) has fined five banks a total of £1.1bn following its investigation into alleged foreign exchange market manipulation.

The total comprises £225m from Citibank, £216m from HSBC, £222m from JPMorgan Chase Bank, £217m from RBS and £234m from UBS. The fine is the largest ever penalty imposed by the FCA. 

The US Commodity Futures Trading Commission has also fined the five banks more than £890m in a separate settlement, while the Swiss regulator has fined UBS a further £87m.

Regulators are continuing to investigate a sixth bank, Barclays. The FCA is launching an industry-wide programme forcing banks to address the root causes of the failings. 

The FCA investigation found that between 1 January 2008 and 15 October 2013, the five banks did not exercise adequate control over their G10 spot FX trading businesses. Policies were high-level and firm-wide in nature, and there was insufficient training and guidance on how these policies applied to this business.

Instead, traders at different banks formed groups in which information was shared about client activity, including using code names to identify clients without naming them. Traders gave their groups nicknames such as “the players”, “the 3 musketeers”, “1 team, 1 dream” and “the A-team”. 

Traders shared the information obtained through these groups to help them work out trading strategies. They then attempted to manipulate fix rates.

 The banks agreed to settle at an early stage and therefore qualified for a 30% discount under the FCA’s settlement discount scheme.

Without the discount the total fine would have amounted to £1.6bn. The investigation lasted 13 months, and involved more than 70 enforcement staff. 

FCA director of enforcement and financial crime Tracey McDermott said: “Firms could have been in no doubt, especially after LIBOR, that failing to take steps to tackle the consequences of a free for all culture on their trading floors was unacceptable. This is not about having armies of compliance staff ticking boxes. 

“It is about firms understanding, and managing, the risks their conduct might pose to markets. Where problems are identified we expect firms to deal with those quickly, decisively and effectively and to make sure they apply the lessons across their business.  If they fail to do so they will continue to face significant regulatory and reputational costs.”

As well as being the largest ever fine imposed by the FCA or its predecessor, the Financial Services Authority, it is also the first time the FCA has pursued a settlement with a group of banks in this way. The UK regulator worked closely with its Swiss and US peers during the investigation.

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