Financial regulators on both sides of the Atlantic imposed multibillion-dollar fines on five global banks Wednesday as part of investigations into rigging of key foreign exchange markets.
The U.K.'s Financial Conduct Authority (FCA) has imposed fines totaling more than £1.1 billion ($1.7 billion) on Citibank, HSBC, JPMorgan Chase Bank, The Royal Bank of Scotland and Switzerland's UBS, it announced. It added that the fines were the largest ever imposed by the FCA, or its predecessor the Financial Services Authority (FSA).
Meanwhile in the U.S., the Commodity Futures Trading Commission (CFTC) ordered the same banks to pay over $1.4 billion in penalties. The formal settlement is for the "attempted manipulation of, and for aiding and abetting other banks' attempts to manipulate, global foreign exchange benchmark rates to benefit the positions of certain traders," it said. It added that the time of the improper conduct varied across the banks, commencing in 2009 for certain banks and continuing into 2012 for each bank.
"The setting of a benchmark rate is not simply another opportunity for banks to earn a profit. Countless individuals and companies around the world rely on these rates to settle financial contracts, and this reliance is premised on faith in the fundamental integrity of these benchmarks," Aitan Goelman, the CFTC's Director of Enforcement, said in a press release on Wednesday morning.
"The market only works if people have confidence that the process of setting these benchmarks is fair, not corrupted by manipulation by some of the biggest banks in the world."
The more detailed breakdown shows that the FCA is fining Citibank $358 million, HSBC $343 million, JPMorgan Chase $352 million, RBS $344 million and UBS $371 million. The CFTC is imposing fines of $310 million each for Citibank and JPMorgan, $290 million each for RBS and UBS, and $275 million for HSBC.
U.K. lender Barclays is also part of the investigation but did not settle. The FCA stated it would continue to progress the investigations which will also cover wider forex business areas. In a press conference on Wednesday morning, a representative from the FCA said that Barclays was the only remaining bank under investigation by the regulator.
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Also in the U.K., the Bank of England (BoE) announced Wednesday that Martin Mallett, its chief forex dealer, was dismissed on Tuesday for "serious misconduct" relating to its internal policies. It stated that Mallett was aware that bank traders were sharing information about client orders. This is not necessarily improper, the BoE stated, but increased the potential for manipulation.
Mallett did not not escalate the matter despite being uncomfortable with the behavior, it added, but was "not at all" related to the BoE's own investigations which found no evidence that any central bank official was involved in any unlawful or improper behavior in the forex market.
Later on Wednesday, BoE Governor Mark Carney said that he accepted the criticism issued in the independent investigation. He again highlighted that Mallett's dismissal was for unrelated reasons but conceded that his conduct might not have been discovered without the review. He added that he was disappointed with the behavior but said that the department he worked in was "outstanding."