After six years of scrutiny, billions of dollars in fines and a flurry of criminal lawsuits, the world’s biggest currency-dealing banks are finally close to drawing a line under global regulatory investigations into the behaviour of their traders, as the EU prepares to announce the results of its probes.
The EU is the last major regulatory authority to conclude its investigation into claims that traders manipulated major currency benchmarks and exchange rates — allegations that first surfaced in 2013.
Brussels’ findings, and potential fines, are due to land this month, several people familiar with the matter said. UBS, Royal Bank of Scotland, JPMorgan Chase, Citigroup, Barclays and HSBC, each of which began negotiating a settlement with the EU in 2017, are in the spotlight. The banks all declined to comment.
“The feeding frenzy that started six years ago is . . . coming to an end,” said one former banker. “But where the shoe could drop next is civil cases in Europe.”
Authorities in the UK, US, Switzerland and Singapore started giving out a total of more than $10bn in fines to 15 banks from late 2014, while investigations have also led to multibillion-dollar settlements in civil cases.
The global foreign exchange probe initially focused on a key benchmark published daily at 4pm London time. In the UK, the Financial Conduct Authority issued its largest fine in November 2014 when it imposed over £1.1bn of penalties on the same group of banks, with a later £280m fine for Barclays. On the same day, US regulators levied fines totalling $2.1bn on a similar group of dealers. In Switzerland, regulator Finma issued a penalty of $138m on UBS.
But the EU’s complex process covering several currencies has been held up, in part because of Credit Suisse’s decision to withdraw from the settlement. A recent decision by the European Court of Justice meant that the EU can no longer announce a cartel settlement if any of the parties decides not to settle, so authorities had to conduct a full investigation before making the settlement announcement. The Swiss bank declined to comment on the matter.
By choosing to settle with EU regulators, banks can reduce their fines by 10 per cent and speed up resolutions. Settling the charges also avoids a detailed statement of facts that can provide ammunition for any potential claimants seeking damages.
While the EU’s decision will mark the end of the regulatory scrutiny, it will still not fully close the matter. In November last year, a lawsuit was filed in the US against some banks on behalf of several investment managers, following an earlier class action lawsuit that resulted in banks settling similar claims for $2.3bn. In December, law firm Quinn Emanuel filed a claim for damages in London in a 200-page document against RBS, UBS, HSBC, Barclays, Citigroup and JPMorgan, alleging that they manipulated the currencies markets, according to Boris Bronfentrinker, a partner at the law firm. The claim is seeking damages for heavy-hitting investors including Allianz Global Investors, PIMCO, Brevan Howard and the Norwegian state pension fund.
Legal risks also remain for a small number of former FX traders. Three of them, from Citi, JPMorgan and Barclays, were found not guilty of antitrust violations in a related US court case last October. Former HSBC trader Mark Johnson, meanwhile, is scheduled for an appeal hearing against his guilty verdict on May 31. His case, while not directly related to the benchmarks under regulatory scrutiny, stems from the heightened focus on traders’ behaviour that has been sparked by the investigations.
Since the allegations about price rigging first came to light, major central banks together with dealers and investors created the FX Global Code of Conduct under the supervision of the Bank for International Settlements, in an attempt to reform practices in the space.
The European Commission declined to comment.
Litany of FX litigation
June 2013
Press reports emerge of collusion and manipulation of the 4pm WM/R benchmark
November 2014
UK’s Financial Conduct Authority fines Citi, JPMorgan, HSBC, Royal Bank of Scotland and UBS a total of $1.7bn. The Commodity Futures Trading Commission levies a $1.4bn penalty on the same banks.
The Office of the Comptroller of the Currency fines Citi and JPMorgan $700m
Swiss regulator FINMA issues a $138m penalty to UBS
May 2015
The US Department of Justice agrees guilty pleas with Citicorp, JPMorgan, Barclays, Royal Bank of Scotland and UBS for a total fine of $2.7bn
The US Federal Reserve fines UBS, Barclays, Citi, JPMorgan, RBS and Bank of America a total of $1.8bn.
November 2015
The New York Department of Financial Services fines Barclays an additional $150m
June 2015
The New York Department of Financial Services issues a penalty of $205m to Deutsche Bank
May 2017
The New York Department of Financial Services fines BNP Paribas $350m
July 2017
The US Federal Reserve Board fines BNP Paribas $246m
June 2018
The New York Department of Financial Services fines Deutsche Bank $205m
November 2017
The New York Department of Financial Services fines Credit Suisse to the tune of $135m
February 2019
The New York Department of Financial Services fines Standard Chartered $40m
