Banks await huge currency rigging fines


NEW YORK–U.S. regulators on Wednesday fined Swiss bank UBS US$342 million for manipulation of foreign exchange markets, as other global lenders prepared for even larger penalties. Five major banks including UBS will pay fines totaling billions of U.S. dollars for rigging the foreign exchange (forex) market in settlements all expected to be unveiled Wednesday by U.S. and UK regulators. Penalities will range from the hundreds of millions of dollars to US$1.0 billion or more, depending on a bank’s involvement in the scheme, according to people familiar with the talks. Regulators have accused the banks of conspiring to manipulate the US$5.3-trillion-per-day foreign exchange market in ways that cheated clients and bolstered their own profits. UBS is to pay a US$342 million penalty to the U.S. Federal Reserve and change the way its foreign exchange system works, the bank said in the first wave of expected announcements on fines. At the same time however, the U.S. Department of Justice has dropped charges against UBS into the currency rigging probe, and granted it conditional immunity for cooperating with the authorities, the bank said in a statement. But its role in the forex affair means that a 2012 non-prosecution agreement between the bank and the U.S. Department of Justice over manipulating Libor benchmark interest rates has been revoked. UBS said that it will plead guilty to fraud in the U.S. over the Libor interest rate-rigging scandal and pay US$203 million in fresh fines.

Global regulators fined UBS the equivalent of US$1.5 billion in 2012 by Swiss authorities for its part in manipulating the Libor rate, a global reference that affects products from student loans to mortgages. Forex Fines The other banks set to be hit by fines linked to the forex scandal are American giants JPMorgan Chase and Citigroup and British lenders Barclays and Royal Bank of Scotland. The steep penalties are expected from the UK’s Financial Conduct Authority, the U.S. Department of Justice, the U.S. Federal Reserve, the U.S. Commodity Futures Trading Commission and the New York Department of Financial Services. Traders used instant messages and online chats to share information about clients and plot trades which regulators have said resulted in boosting bank profits at the expense of clients. Barclays is expected to be hit with possibly the largest fine after it was left out of a US$4.2 billion settlement that the other four banks, along with HSBC and Bank of America, reached in November with U.S. and UK regulators over forex market manipulation. Barclays on April 29 announced it had set aside an additional 800 million pounds (US$1.24 billion) for the foreign exchange case, taking the group’s total provision on the matter to 2.05 billion pounds. At least four of five banks in Wednesday’s agreement are expected to plead guilty to a U.S. criminal antitrust charge: JPMorgan, Citigroup, Barclays and RBS. A guilty plea typically restricts a bank’s operations in the U.S., but regulators have been working on waivers to ensure customers are not harmed, according to people familiar with the matter.