Barclays hit with record-breaking £1.53bn fine as banks’ total forex rigging bill reaches £4bn

20th May 2015


Barclays has been fined £1.53bn by the Financial Conduct Authority and US regulators for its traders’ part in fixing foreign exchange markets, while separate penalties for other banks took the total bill for the scandal to £4bn ($6.3bn).

Barclays, RBS, Citigroup and  JP Morgan pleaded guilty to the US Department of Justice, while UBS was granted immunity for being the first to report the offences.

This was the second wave of penalties as in November last year fines totalling £1.7bn, ($2.6bn) were handed out by UK and US regulators.

In the UK, UBS was handed the biggest fine, at £233m, followed by £225m for Citibank, JPMorgan at £222m, RBS at £217m, and £216m for HSBC, according to the Guardian. 

In the US, the regulator fined Citibank and JP Morgan $310m each, $290m each for RBS and UBS, and $275m for HSBC. A second US regulator, the Office of the Comptroller of the Currency, also imposed separate fines on JP Morgan, Citi and Bank of America.

Barclays’ £284m fine by the UK regulator is the largest penalty ever imposed by the FCA, or its predecessor the Financial Sernvices Authority (FSA).

The FCA says its failure adequately to control its FX business is particularly serious in light of its potential impact on the systemically important global currency market, which is worth £3.5 trillion a day.

The regulator says the bank’s failings undermined confidence in the UK financial system and put its integrity at risk.

Georgina Philippou, the FCA’s acting director of enforcement and market oversight says: “This is another example of a firm allowing unacceptable practices to flourish on the trading floor. Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm’s interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system.  Firms should scrutinise their own systems and cultures to ensure that they make good on their promises to deliver change.”

Between 1 January 2008 and 15 October 2013, Barclays’ traders were able to inappropriately share information about clients’ activities and attempt to manipulate spot FX currency rates, including in collusion with traders at other firms, in a way that could disadvantage those clients and the market.

The FCA says Barclays’ controls over its FX business were inadequate and ineffective

Barclays engaged in collusive behaviour in which traders from different banks, formed tight knit groups and communicated through electronic messaging systems and chat rooms.

One group described themselves as “the players”, while another referred to himself and others in the chat room as “the 3 musketeers” and commented “we all die together”.

The information obtained through these groups helped traders determine their trading strategies.

This involved traders attempting to manipulate the relevant currency rate in the market, for example, to ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate at which it had bought that currency in the market to ensure a profit for Barclays.

Traders had the opportunity to benefit the bank by attempting to manipulate market rates to prevent Barclays’ clients from receiving pay-outs from options they had purchased.

The failings in Barclays’ FX business persisted despite similar control failings in relation to Libor and  Gold fixing, which were the subject of previous FSA and FCA enforcement actions.

Although Barclays made some improvements following these enforcement actions, it failed to take adequate steps to address the underlying root causes of the failings in its FX business.

Barclays qualified for a 20% discount on its fine – without this, the FCA would have imposed a financial penalty of £356m.

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