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Global Banks to Pay $1.2B in Settlement for FX Manipulation

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Following a global investigation by the U.S., British, Swiss and European Union (EU) regulators into the alleged foreign exchange market manipulation, five major global banks have been imposed a fine of around €1.07 billion ($1.2 billion) by EU antitrust regulators. The news was reported by Reuters. The banks were accused of rigging prices in the $5.1 trillion-a-day foreign exchange market.

Barclays PLC (BCS - Free Report) , Citigroup (C - Free Report) , JPMorgan (JPM - Free Report) , Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) and Royal Bank of Scotland (RBS - Free Report) are the accused banks. Among these, Citigroup has been hit the hardest with penalty of €311 million. RBS has been fined €249 million, JPMorgan €229 million, while Barclays will be paying €210 million and MUFG around €70 million.

Commissioner Margrethe Vestager, who oversees competition policy, said, “Today we have fined Barclays, the Royal Bank of Scotland, Citigroup, JPMorgan and MUFG Bank and these cartel decisions send a clear message that the commission will not tolerate collusive behavior in any sector of the financial markets.”

“The behavior of these banks undermined the integrity of the sector at the expense of the European economy and consumers”, she added.

JPMorgan and RBS readily agreed to settle the cases, while Barclays and Citigroup refrained from commenting. Further, MUFG informed about steps it has taken to avoid such manipulation in the future.

Notably, Swiss bank UBS Group AG (UBS - Free Report) escaped penalty as it informed the authorities about the cartels.

Though the EU has been sluggish in its investigation, global major banks have already faced up to $10 billion in penalties by the U.S., U.K. and Swiss regulators. Notably, after two years of penalizing the financial firms for collusion of LIBOR  and Euribor rates, the EU neared conclusion of its six-year long investigation for rigging prices.

Probes & Allegations

Per the EU, individual traders of the accused banks led the formation of two cartels for manipulating the spot foreign exchange market for 11 currencies, which included the dollar, the euro and the pound.

Per the accusations, traders colluded to set up chat rooms such as “Essex Express 'n the Jimmy”. Moreover, knowing each other on personal basis, they colluded in Bloomberg chatrooms with names such as Three Way Banana Split and Semi Grumpy Old Men. The traders’ exchanging of information on their risk positions, sharing confidential data in the currency market pertaining to spot and future trades, as well as those related to volume of deal flow, and sometimes synchronizing their trading strategies, occurred between 2007 and 2013.

"The traders, who were direct competitors, typically logged in to multilateral chatrooms ... and had extensive conversations about a variety of subjects, including recurring updates on their trading activities," the Commission said in a statement.

Currency market rigging is not new in the banking industry. Previously, some big banks were penalized for rigging LIBOR — a benchmark for credit card rates and other loans.

Globally, banks have faced more than $200 billion in penalties in recent years, following investigations into their shoddy malpractices, including interest-rate manipulation, violation of agreements and inadequate selling of a number of financial products.


Regulatory authorities are further investigating scandals related to foreign exchange rate fixing, and are determined to put forward a landmark judgment to terminate such practices in the future, bring justice to sufferers, and punish wrongdoers. While settlement of such issues will put to rest a long-drawn investigation and bring reprieve to the banks, this comes as a huge blow to their financials.

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