US justice department pushes for forex deal with banks

Gina Chon in Washington and Tom Braithwaite in New York

The U.S. Department of Justice is pushing for five banks, including JPMorgan Chase and Barclays, to resolve allegations they manipulated the foreign exchange markets in one mega settlement scheduled for mid-May, according to people familiar with the case.

The potential resolution — which would see some institutions pay about $1 billion each — would mark another step in Wall Street's efforts to put behind it multiple scandals, which have already led to billions of dollars in penalties and several guilty pleas.

Citigroup, Royal Bank of Scotland and UBS are the other three banks that are in settlement talks with the DoJ, which is demanding most of the banks plead guilty to criminal charges, the people said.

People pass a sign for JPMorgan Chase & Co. at it's headquarters in Manhattan.
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But closing the forex investigations into five banks simultaneously is a complicated process given the specific circumstances around each case, and it is unclear if the DoJ will meet its goal of resolving all of the probes at once.

The five banks will also need waivers from the Securities and Exchange Commission and the Department of Labor to continue engaging in certain activities because of the forex enforcement actions. Uncertainty around whether such waivers will be granted could also delay a settlement, the people said.

Read MoreUS probe delays Barclays forex settlement

For Barclays, part of the bank's participation in a large settlement hinges on whether an investigation into algorithms in the bank's forex trading platform will be excluded from the resolution, according to these people.

The trading platform is being reviewed by New York's Department of Financial Services, which needs additional time to investigate whether the algorithms were used to rig the forex markets.

It is unclear whether Barclays would agree to such an exclusion, since the bank has wanted to settle the forex investigation with all of the regulators in one resolution.

The DFS is also looking into trading algorithms of Deutsche Bank's forex platform, but the German lender is not included in this round of settlement talks with the five banks, according to people familiar with the matter.

The UBS case has been complicated because of disagreements over how much credit the bank should receive for being the first to come forward to authorities regarding information it had on forex activities.

As a result, the bank assumed it would have immunity in the antitrust probe but the investigation has since widened into whether Wall Street groups made adequate disclosures to investors and counterparties about certain currency products and how banks were profiting.

The expanded probe is being conducted by the fraud division of the DoJ, which is not part of the DoJ antitrust programme that may give immunity to the first members of an alleged cartel that comes forward and co-operates with authorities.

Last November, six banks agreed to pay $4.3 billion to authorities in the U.S., U.K. and Switzerland in the first settlements announced in the forex investigation.

JPMorgan, Citigroup, UBS and RBS were part of those initial resolutions, but they did not include the DoJ.

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