Federal Reserve Fines HSBC $175 Million for ‘Unsafe FX Trading’

The UK lender had insufficient oversight and controls over its FX traders.

HSBC Holdings PLC (HSBA.L) has been slapped with a $175 million fine by the US Federal Reserve board as the central bank found a long pattern of “unsafe and unsound practices in the foreign exchange (FX) markets.”

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Announcing the settlement on Friday, the Fed also ordered HSBC to put in place a program to ensure that the alleged violation doesn’t happen again.

The UK lender had insufficient oversight and controls over its FX traders, who allegedly discussed trading positions with competitors using electronic chatrooms, the board said.

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The HSBC fine comes amid a larger Fed investigation into forex market manipulation. The regulator has also slapped BNP Paribas, UBS, Deutsche Bank and Barclays with enforcement actions. These were major blows for these banks, both for their reputation and their finances.

It is also the latest action taken by the US authorities as part of a long-running crackdown on price-fixing across FX markets, in which several lenders have already pleaded guilty to conspiring to manipulate currency prices.

More specifically, the central bank found that the bank’s traders, using different names to disguise client requests for quotes and trading activity, shared information and conspired to move currency benchmarks, including the so-called 4 p.m. fix in London.

The new penalty could cause more damage to the global bank’s forex trading business and even fuel more calls for HSBC to face full criminal charges. Several class-action lawsuits have been filed and settled against HSBC and other lenders, with banks paying out hundreds of millions in compensation.

Other banks have also faced huge fines for allowing their traders to club together to rig prices in FX markets. Last year, four banks – Barclays, Royal Bank of Scotland, Citigroup and JP Morgan Chase – pleaded guilty to conspiracy to rig the foreign exchange market and fines totalling $5.6 billion were handed down by the US Department of Justice.

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