BY Fraser Tennant
Six banks have been hit with fines totalling £2.7bn for their part in failing to stop traders who were manipulating the financial system by rigging the £3.5 trillion-a-day foreign exchange (FOREX) markets.
The penalties were handed out to Royal Bank of Scotland (RBS), HSBC, JPMorgan, UBS, Citibank and Bank of America Merrill Lynch following an 18-month investigation by the Financial Conduct Authority (FCA) and its counterparts in Switzerland and the US.
The FCA’s portion of the fines represents the biggest financial punishment ever levied by the British regulator.
Yet another British bank, Barclays, has been told to expect similar punitive action for its part in the scandal.
The regulators’ investigation discovered that some traders, who referred to themselves as ‘the A-team’, ‘the Players’ and ‘the 3 musketeers’, made millions for their banks while pocketing bonuses worth hundreds of thousands of pounds – often in just a single afternoon.
Evidence collected showed that traders posted messages on forums bragging about making 'free money' and collecting eye-watering profits – the very same forums where, over a five-year period, they colluded to share privileged client information.
The regulators have also warned that anyone found guilty of manipulating the FOREX market could face jail but although it’s believed that 30 traders have been sacked or suspended, not one has faced charges.
Martin Wheatley, chief executive of the FCA, said “The FCA does not tolerate conduct which imperils market integrity or the wider UK financial system. These record fines mark 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. Senior management commitments to change need to become a reality in every area of their business.
“But this is not just about enforcement action. It is about a combination of actions aimed at driving up market standards across the industry. All firms need to work with us to deliver real and lasting change to the culture of the trading floor. This is essential to restoring the public’s trust in financial services and London maintaining its position as a strong and competitive financial centre.”