US and British regulators have slapped massive fines on six major global banks for rigging the foreign exchange market and Libor interest rates. They called the banks' frauds 'brazen schemes' to harm clients.
In a settlement announced by the US Justice Department on Wednesday, the banks agreed to pay close to $6 billion (5.3 billion euros) in fines for their manipulations.
The deal included guilty pleas from UK-based Barclays Bank and Royal Bank of Scotland, as well as US banks JPMorgan Chase and Citigroup. They admitted to conspiring to manipulate the massive currency market.
Switzerland's UBS also pleaded guilty - in its case for one count of wire fraud in connection with Libor interest rate manipulations. However, the Justice Department granted the Swiss bank conditional immunity for cooperating with the investigation.
Together, the five banks agreed to a record $2.5 billion in criminal penalties, the largest set of antitrust fines ever obtained by the Department of Justice.
In addition, these five banks, plus the Bank of America, will pay more than $1.8 billion in fines to the US Federal Reserve over "unsafe and unsound practices" in forex markets.
Authorities in the United States and Britain have so far fined seven banks a total of over $10 billion for failing to stop their traders from financial market manipulation. Regulators described the banks' action as "brazen schemes" to cheat their clients and bolster their own profits.
The US Justice Department said in a statement that the traders communicated in a chatroom referred to as "the Cartel" in which they colluded to withhold bids or offers for euros or dollars at mutually agreed times, in order to enhance each other's trading positions.
US Attorney General Loretta Lynch told a news conference Wednesday the chat room nickname "aptly describes the brazenly illegal behavior they were engaged in on a near-daily basis."
"They acted as partners, rather than competitors, in an effort to push the exchange rate in directions favorable to their banks but detrimental to many others," she said. "And their actions inflated the banks' profits while harming countless consumers, investors and institutions around the globe."
Barclays special case
Britain's Barclays Bank was handed down the biggest fine, totaling $2.4 billion, because it had not participated in an earlier deal with US and British regulators.
Barclays staff continued to engage in misleading sales practices despite CEO Antony Jenkins' pledge to overhaul the bank's high-risk, high-reward culture
Benjamin Lawsky, the head of the Department of Financial Services for New York State, said the Barclays' staff had engaged in "a brazen 'heads I win, tails you lose' scheme to rip off their clients."
Barclays CEO Jenkins said he regretted that "some individuals" within the bank "have once more brought our company and industry into disrepute."
"This demonstrates again the importance of our continuing work to build a values-based culture and strengthen our control environment," he said.
Not over yet
The guilty pleas from the banks will make it easier for their clients, including pension funds and investment managers, to sue them for losses resulting from the manipulations.
Simon Hart, banking litigation partner at London law firm RPC, told the news agency Reuters that there was already "a lot of work going on behind the scenes" about how claims could be brought forward.
"Those potential claimants will be looking to today's announcement for evidence to support their analysis," he said.
uhe/nz (Reuters, AFP, dpa)