Barclays, Citigroup, Royal Bank of Scotland, JPMorgan and Japan’s MUFG have been fined more than €1bn by the EU’s competition watchdog for rigging the multitrillion-dollar foreign exchange market after the last financial crash.
The conclusion of the five-year European investigation into benchmark currency rate manipulation is the latest in a scandal that shocked the banking industry when allegations first surfaced in 2013. Since then, more than a dozen financial institutions have paid almost $12bn in fines around the world.
The EU probe identified two separate cartels of traders — dubbed the “Three Way Banana Split” and “Essex Express” — that used online chat rooms to share information about customers’ orders, prices and other trading activities in order to manipulate the spot currency markets. Most of the traders knew each other on a personal basis, according to the European Commission, also using other chat rooms such as the “Semi-Grumpy Old Men”.
Citigroup was hit with the biggest fine of €311m, followed by RBS with €249m, JPMorgan at €229m, Barclays at €210m and MUFG with €70m. UBS also participated but avoided a €285m fine as it was the first to alert the EU to the cartels. The other banks settled the charges, and all but MUFG also applied for leniency which reduced fines by between 10 and 50 per cent.
The decision will clear the way for civil suits in the region, with law firm Scott and Scott poised to launch the European leg of a US class-action lawsuit that resulted in a $2.3bn settlement with 15 banks.
The market-rigging activity took place between 2007 and 2013, and involved 11 currencies, including the euro, pound and dollar. The information shared by traders “enabled them to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when. Occasionally, these information exchanges also allowed the traders to identify opportunities for co-ordination,” said the EU.
The EU said there was another investigation involving Credit Suisse, regarding “an alleged infringement which may have taken place in another chatroom” but it declined to provide any further details.
Credit Suisse said it “does not believe that its employees engaged in any conduct in the FX markets which violated the European Union’s competition rules”. It added that it was co-operating with the EU investigation “but intends to vigorously contest the substance of the allegations”.
“Foreign exchange spot-trading activities are one of the largest markets in the world, worth billions of euros every day,” said Margrethe Vestager, European competition commissioner. “These cartel decisions send a clear message that the commission will not tolerate collusive behaviour in any sector of the financial markets.”
JPMorgan said: “We are pleased to resolve this historical matter, which relates to the conduct of one former employee. We have since made significant control improvements.”
Barclays declined to comment. The British bank took a £240m provision related to the forex probe at the end of 2017, according to a filing.
RBS acknowledged the conclusion of the investigation and said its €249m fine was “fully covered by existing provisions”. It added that it was co-operating with other unnamed authorities on further, similar probes into past misconduct in currency trading and could face more “material” penalties and consequences.
Lawyers for investors in the US civil case have been waiting for the ruling to launch the European leg of claims. David Scott, managing partner of Scott and Scott, the co-lead on the US class-action claim, said European investors remained uncompensated.
Belinda Hollway, a Scott and Scott partner, said: “We’ve been waiting for this step before initiating a recovery action. Our firm will be working to recoup losses suffered by non-US pension funds, asset managers, insurance companies and multinational corporations, among others, as a result of the banks’ wrongdoing.”
Litany of FX litigation
Press reports emerge of collusion and manipulation of the 4pm WM/R benchmark
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
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
The New York Department of Financial Services issues a penalty of $205m to Deutsche Bank
The New York Department of Financial Services fines Barclays an additional $150m
The New York Department of Financial Services fines BNP Paribas $350m
The US Federal Reserve Board fines BNP Paribas $246m
The New York Department of Financial Services fines Credit Suisse to the tune of $135m
The New York Department of Financial Services fines Deutsche Bank $205m
The New York Department of Financial Services fines Standard Chartered $40m