Major banks admit guilt in forex probe, fined $6bn

US Assistant Attorney-General William Baer of the Justice Department Antitrust Division (left) and US Attorney-General Loretta Lynch announce a resolution has been reached with global financial institutions in connection with long-running manipulation of the $5tn-a-day Foreign Exchange spot market during a news conference at the Robert F Kennedy Justice building in Washington, DC, yesterday. Lynch announced settlements with five of the world’s biggest international banks, including Swiss bank UBS which will pay $545mn to US authorities to end an investigation into alleged manipulation of currency rates.Reuters/New York/London/ZurichFour major banks pleaded guilty yesterday to trying to manipulate foreign exchange rates and six banks were fined a total of nearly $6bn in a settlement that substantially ends a global probe into misconduct in the $5tn-a-day market. In total, authorities in the US and Europe have fined seven banks over $10bn for failing to stop their forex traders from sharing confidential information about client orders and coordinating trades to boost their own profits. Traders at Citigroup, JP Morgan, Barclays and Royal Bank of Scotland, who described themselves as “The Cartel”, used an invitation-only electronic chatroom and coded language to manipulate the price of US dollars and euros between December 2007 and January 2013, according to US authorities. The four banks pleaded guilty to conspiring to manipulate the foreign exchange market. The misconduct occurred after regulators had started punishing banks for rigging the London interbank offered rate (Libor), an interest rate benchmark. Britain’s Barclays faced the biggest fine yesterday with a penalty of $2.4bn because it did not join in an earlier November settlement with British and some US authorities due to complications with its regulator in New York. Barclays fired 8 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.” Barclays had set aside $3.2bn to cover any forex related settlement. Shares in the bank rose more than 2%. Swiss bank UBS, which avoided a guilty plea over the forex debacle, pleaded guilty instead to one count of wire fraud and will pay a $203mn fine for its role in rigging Libor after its involvement in the forex scandal breached an earlier DOJ agreement. Switzerland’s largest bank also had to pay $342mn to the Federal Reserve over attempted manipulation of forex rates. The US central bank fined six banks for unsafe and unsound practices in the foreign exchange markets, including a $205mn fine for Bank of America, which, like UBS, avoided a guilty plea. UBS’s penalty was lower than expected and this contributed to a more than 3% rise in UBS shares to their highest level in six and a half years. 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. Transcripts of online chat rooms made public yesterday demonstrated the clubby, audacious nature of the dealing desks with one employee at Barclays remarking, “If you aint cheating, you aint trying.”