Major Banks Hit with $5.6 Billion in Fines for Forex Manipulation

The banks also pleaded guilty and admitted their FX traders (aka ”The Cartel” and “The Bandits’ Club”) colluded against clients'

Six of the biggest banks in the world were fined today a total of about $5.6 billion in settlements and four of the major banks also pleaded guilty for attempting to manipulate global FX rates at the expense of their clients and all other market participants. On top of financial regulators on two sides of the Atlantic, the US Department of Justice handed about $3 billion in fines.

The settlement today is the result of investigations by financial watchdogs and regulators around the world that focus on chat groups in which institutional dealers sent instant messages over their Bloomberg terminals. For a period of three years, in chat groups with names such as ”The Cartel” and “The Bandits’ Club,” bank traders shared information with competitors allowing them to execute their own trades before filling client orders.

The FX rates manipulation scandal had serious negative effects on the brands of the major international banks as traders were exposed, clients had their confidence shaken and investors worried about the overall impact of the fines crossing over $10 billion after today.

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Barclays was hit with the biggest fine in total because it did not agree to an earlier settlement in November. The UK Financial Conduct Authority (FCA) imposed a penalty of £284,432,000 ($441 million) on Barclays today for failing to control business practices in its foreign exchange business in London. The U.S. Commodity Futures Trading Commission (CFTC) issued an order today against Barclays, forcing the bank to pay a civil monetary penalty of $400 million for attempted manipulation, false reporting, and aiding and abetting other banks’ attempts to manipulate global foreign exchange benchmark rates to benefit the positions of certain traders.

Marshall Bailey, President of the ACI Financial Markets Association, commented: “These charges make sobering reading and are another wake up call to the FX market that it needs to address behavioural issues. Foreign exchange is the world’s largest market and most important market, as it facilitates trade and economic activity. It is vital that we regain trust in its operation. It must operate to the very highest standards. Clearly some in the market have fallen short of this standard.”

“As many of the issues the market experienced are due to individual conduct, it is critical to embed a strong culture of individual accountability and reinforce the right messages across all staff members. There is now a real chance to learn and to ensure the right practices are applied and that regulators and market practitioners are working closely to establish a common set of standards and the best behaviour possible, based on an industry standard single code of conduct,” he added.

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