Barclays and UBS FX Probe Settlements May Get Revoked: Bloomberg

Investigations into the currency and interest rates manipulation cases could hit new depths as the US Department of Justice is expected to revisit settlements and revert them, if banks are found to have breached practices, Bloomberg reports citing sources.

The news adds to the existing concerns the firms in question face, as previous settlements come under question. According to the report, authorities are assessing as to whether banks were involved in currency rates manipulation even after settling with regulators for their involvement in the Libor issues.

The litigations are known as deferred prosecution and non-prosecution agreements, and are commonly used by the Justice Department for investigations in sanctions violations to market manipulation, the banks involved, include Barclays, UBS, HSBC and RBS.

Banks involved in the cases have factored-in monetary penalties, however the DOJ's new stance on the matter can potentially cause upset for firms involved.

The latest details follow on from Leslie Caldwell, the head of the Justice Department’s criminal division, who spoke about the case during a speech on the 16th of March, she said: “Where banks fail to live up to their commitments, we will hold them accountable.”

Settled Cases

Authorities either side of the Atlantic, in the US and UK, have issued fines against a number of banks and former bank employees. Furthermore, the leading financial institutions, including UBS, Barclays and RBS settled with authorities in 2012 and 2013, respectively.

In November 2014, banks faced penalties of $4.3 billion in a shake-up that rocked the banking sector. The banks were found guilty of rates manipulation as senior traders operated cartels that foiled currency figures. The US DOJ is believed to be collecting around $1 billion in fines from firms under investigation.

Recently, UBS published details about a $100 million settlement relating to the currency markets, the bank outlined details in its 2014 Annual Report.

FCA on Improving Accountability in Banking Sector

In the UK, the FCA issued a notification about new changes that aim to strengthen the regulatory environment for banking institutes. The watchdog will introduce two new regimes called the; ‘Senior Managers Regime’ and a ‘Certification Regime’, which will impact the accountability of individuals dealing in regulated environments. The new framework's objectives are to encourage individuals to take greater responsibility for their actions and make it easier for both firms and the regulators to hold individuals to account.

The new regimes come eight months after the joint authorities, FCA and the PRA, consulted on how they would implement the new guidelines.

The post-2008 scandals have added to the misery financial markets participants face, after the Bankruptcy of Lehman Brothers and the fall-down of AIG. Policy makers and governments have tried to relieve the market through the 2009 OTC derivatives reforms, which saw a number of changes in the way OTC instruments were settled and cleared, notably the migration of over-the-counter products to centrally cleared venues.

In the US, the House of Representatives put forward a 2016 budget plan to assess the workings of the Dodd-Frank Act in relation to deficits, the Act came into law in 2010 after seeking approval in the senate, with a number of key rules affecting the margin FX market in the US, in particular trading approaches such as FIFO rules and reduced Leverage .

The fines against banks are being questioned by some practitioners as their value is not seen as a deterrent and future wrongdoing can only be avoided by stringent reforms.