Five banks have been collectively fined £2bn by UK and US regulators for failing to control business practices in foreign exchange trading operations.
HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase and Citibank have all been fined.
A separate probe into Barclays is continuing.
The UK’s Financial Conduct Authority (FCA) and the US regulator, the Commodity Futures Trading Commission (CFTC) issued the fines.
Separately, the Swiss regulator, FINMA, has penalised UBS 134m Swiss francs.
Barclays, which had been expected to announce a similar deal to the other banks, said it would not be settling at this time.
After discussions with other regulators and authorities, we have concluded that it is in the interests of the company to seek a more general coordinated settlement, it said in a statement.
Failings ‘undermine confidence’
The fines follow a year-long investigation by regulators into claims that the foreign exchange market – in which banks and other financial firms buy and sell currencies between one another, was being rigged.
The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets.
About 40% of the world’s dealing is estimated to go through trading rooms in London.
The FCA fined the five banks a total of £1.1bn, the largest fine imposed by it or its predecessor, the Financial Services Authority.
At the heart of today’s action is our finding that the failings at these banks undermine confidence in the UK financial system and put its integrity at risk, the FCA said.
The US regulator, the Commodity Futures Trading Commission, has fined the same banks a total of more than $1.4bn (£900m).
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, said the CFTC’s director of enforcement Aitan Goelman.
The CFTC said its investigation found certain foreign exchange traders at the banks had coordinated their trading with traders at other banks to attempt to manipulate benchmark foreign exchange rates.
It said they had used private online chat rooms to communicate with one another.
The FCA said it had worked closely with the CFTC and other regulators in the US, Europe and the UK in issuing the fines, and said it was the first time it had pursued a settlement with a group of banks in this way.
Today’s fine marks the gravity of the failings we found and firms need to take responsibility for putting it right. They must make sure their traders do not game the system to boost profits or leave the ethics of their conduct to compliance to worry about, said FCA chief executive Martin Wheatley.
The failings occurred between 1 January 2008 and 15 October 2013, the FCA found.
The FCA said the banks had not exercised adequate and effective control over their foreign exchange trading businesses, training was insufficient and that the right values and cultures were not sufficiently embedded in the banks’ foreign exchange businesses.
It found traders at different banks had formed tight knit groups to share information about client activity, using code names such as the 3 musketeers, the A-team and 1 team, 1 dream to describe the clients.
The banks all issued statements following the fines:
The Royal Bank of Scotland said it had placed six individuals into a disciplinary process and suspended three of them pending its own further investigation. Chief executive Ross McEwan said the bank had fallen well short of the standards he expected.
HSBC said it does not tolerate improper conduct and will take whatever action is appropriate.
UBS said it had taken appropriate disciplinary action against employees involved in the matter.
JP Morgan said the trader conduct described in the settlements was unacceptable. It added it had made significant improvements to its systems and controls
Citigroup said it had acted quickly once it became aware of the issues. We have already made changes to our systems, controls and monitoring processes, it added.
Chancellor George Osborne said the fines were part of a long term plan that is fixing what went wrong in Britain’s banks and our economy.
All of this action means the world can have confidence in the integrity of Britain’s financial markets, he added.
Earlier this year, FCA chief executive Martin Wheatley said that the currency rigging scandal was every bit as bad as the manipulation of Libor, the key global interest rate used to price loans, mortgages and set returns on investment products.
Several senior traders have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme.
Bank of England cleared
Separately, the Bank of England – which had been accused of knowing about the foreign exchange scandal, but doing nothing about it – published a separate report by Lord Grabiner, clearing its officials.
There was no evidence that any Bank of England official was involved in any unlawful or improper behaviour in the FX [foreign exchange] market, it said.
It said the suspension of the Bank’s chief dealer in March, and his subsequent dismissal on 11 November was unrelated to the foreign exchange scandal.
The individual’s dismissal was as a result of information that came to light during the course of the Bank’s initial internal review into allegations relating to the FX market and Bank staff. This information related to the Bank’s internal policies, not to FX, a Bank spokesperson said.