(Reuters) – Regulators fined six major banks including Citigroup (C.N) and UBS (UBSN.VX) a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market, following a year-long global investigation.
HSBC (HSBA.L), Royal Bank of Scotland (RBS.L), JP Morgan (JPM.N) and Bank of America (BAC.N) also face penalties resulting from the inquiry that has put the largely unregulated $5 trillion-a-day market on a tighter leash, accelerated the push to automate trading and ensnared the Bank of England.
In the latest scandal to hit the financial services industry, dealers shared confidential information about client orders and coordinated trades to make money from a foreign exchange benchmark used by asset managers and corporate treasurers to value their holdings. Dozens of traders have been fired or suspended.
Dealers used code names to identify clients without naming them and created online chatrooms with pseudonyms such as “the players”, “the 3 musketeers” and “1 team, 1 dream” in which to swap information. Those not involved were belittled and traders used obscene language to congratulate themselves on quick profits made from their scams.
Britain’s Financial Conduct Authority (FCA) fined five lenders $1.77 billion, the biggest penalty in the history of the City of London, and the U.S. Commodity Futures Trading Commission (CFTC) ordered them to pay a further $1.48 billion.
“Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right,” FCA Chief Executive Martin Wheatley said.
Banks had to understand that responsibility for good business practice went beyond their compliance departments, which are tasked with ensuring internal and external rules are followed. “They must make sure their traders do not game the system to boost profits or leave the ethics of their conduct to compliance to worry about,” said Wheatley.
The U.S. Office of the Comptroller of the Currency, which regulates banks, also fined the U.S. lenders $950 million and was the only authority to penalise Bank of America.