After numerous global regulators announced today about settlements with several major banks involved in the foreign exchange fixing scandal, the U.S. Office of the Comptroller of the Currency (OCC) was the latest to join the party, announcing a total of $950 million in fines against three national banks for “unsafe or unsound practices related to their foreign exchange trading businesses.”
The investigations conducted by the global regulators discovered that several major banks had been colluding around the time of foreign exchange fixings. Today a slew of fines started hitting the wires with the UK’s Financial Conduct Authority (FCA) and the U.S. Commodity Futures Trading Commission (CFTC) leading the way.
The Financial Conduct Authority (FCA), the UK’s financial regulator, announced fines totaling £1.1 billion ($1.7 billion) for five prominent banks for ineffective controls among foreign exchange traders between January 1, 2008 and October 15, 2013.
At the same time, the U.S. CFTC ordered five banks to pay over $1.4 billion in penalties for manipulation of Foreign Exchange Benchmark Rates between 2009 and 2012.
According to the foreign exchange fixing probe findings, several traders at major banks had been sharing sensitive client order flow information between themselves, colluding to manipulate foreign exchange rates in their favor.
Comptroller of the Currency, Thomas J. Curry, shared in a statement by the OCC, “We expect national banks and federal savings associations to have controls in place that are sufficiently robust to ensure that employees will follow the law and adhere to the highest standards of conduct.”
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“The enforcement actions we are issuing today make clear that the OCC will take forceful action, not only when the institutions we supervise engage in wrongdoing, but when management fails to exercise the oversight necessary to ensure that employees follow laws and regulations intended to protect customers and maintain the integrity of markets,” he concluded.
While global regulators have issued hefty fines now totaling about $4.3 billion, two banks stand out – JPMorgan Chase’s (NYSE:JPM) and Citi’s (NYSE:C) fines now total more than $1 billion dollars each. The OCC’s examinations found that the banks had failed to identify or prevent employee misconduct related to FX sales and trading.
The $950 million total includes $250 million against Bank of America, $350 million against Citibank, and $350 million against JPMorgan Chase (NYSE:JPM) Bank. In addition to assessing civil money penalties, the OCC issued cease and desist orders requiring the banks to correct deficiencies and enhance oversight of their FX trading activity.
According to a statement issued by Citi (NYSE:C), “The bank acted quickly upon becoming aware of issues in our foreign exchange business and we have already made changes to our systems, controls and monitoring processes to better guard against improper behavior.”
“While today’s settlements resolve significant investigations into Citi’s foreign exchange business, as we have previously disclosed, several additional regulatory agencies and enforcement bodies are conducting investigations and making inquiries into this business. We continue to fully cooperate with these investigations and inquiries,” the statement concluded.
The market reacted somewhat negatively to the announcement, with JPMorgan Chase (NYSE:JPM) losing 1.6%, while the decline at Citi (NYSE:C) was a more modest one, with market players expecting to a certain extent the final outcome of the foreign exchange fixing scandal.
For more details about the implications of the foreign exchange rates fixing on the business of major banks, the Forex Magnates team has published an analysis outlining the final outcome of the forex probe and the banks’ FX business going forward.