Currency probe nets US$6B, guilty pleas
WASHINGTON/LONDON • Six of the world’s biggest banks will pay US$5.8 billion and five of them agreed to plead guilty to charges tied to a currency-rigging probe as they seek to wind down almost half a decade of enforcement actions.
Citicorp, JPMorgan Chase & Co., Barclays PLC and Royal Bank of Scotland PLC agreed to plead guilty to felony charges of conspiring to manipulate the price of U.S. dollars and euros, according to settlements announced by the U.S. Justice Department in Washington Wednesday. The main banking unit of UBS Group AG agreed to plead guilty to a wire-fraud charge related to interest-rate manipulation. The Swiss bank, the first to co-operate with antitrust investigators, was granted im- munity in the currency probe.
The four banks that agreed to plead guilty to currency charges are among the world’s biggest foreign-exchange traders. They were accused of colluding to influence benchmark rates by aligning positions and pushing transactions through at the same time. Traders who described themselves as members of “The Cartel” used online chat rooms to discuss their positions before the rates were set and suppress competition in the market, the Justice Department said.
All of the banks that pleaded guilty said they received needed waivers from the U.S. Securities and Exchange Commission to continue managing mutual funds and raise capital quickly, a person familiar with the matter told Bloomberg.
The scheme was a “brazen display of collusion,” U.S. Attorney General Loretta Lynch said in a statement. “This Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favour, who subvert our marketplaces and who enrich themselves at the expense of American consumers,” she said.
The accords bring the total fines and penalties paid by the five banks to resolve the currency investigations to about US$9 billion, the Justice Department said.
In the settlement with the Justice Department, Citicorp parent Citigroup Inc. will pay US$925 million, the highest of the banks penalized. Barclays agreed to a fine of US$650 million. JP Morgan will pay US$550 million, and Royal Bank of Scotland Group Plc agreed to a US$395 million fine. UBS will pay US$203 million.
Separately, the Federal Reserve imposed fines of more than US$1.6 billion on the five banks for “unsafe and unsound practices.” London- based Barclays will pay an additional US$1.3 billion as part of settlements with the New York Department of Financial Services, the Commodity Futures Trading Commission and the U.K.’s Financial Conduct Authority.
As part of its settlement with New York banking superintendent Benjamin Lawsky, Barclays agreed to terminate eight employees engaged in currency trading between London and New York.
The Fed also fined Bank of America Corp. US$205 million for failing to detect and address conduct by traders who discussed the possibility of entering into agreements to manipulate currency prices, according to a statement.
“The resolution will come out of our existing reserves,” said Lawrence Grayson, a spokesman for Bank of America.
The penalties represent the first criminal resolutions in a two-year currency probe, which is ongoing, said Andrew McCabe, assistant director in charge of the Federal Bureau of Investigation’s Washington Field Office.
The settlements show the eagerness of bank executives to end one of the last big legal cases dogging the industry. Scandals involving the aggres- sive sale of mortgage bonds and interest-rate rigging helped reinforce the view that some firms are too big to manage properly and should be broken up.
“This is a very calculated move to get the Justice Department off their backs, because otherwise, this could go on for years,” said Phillip Phan, a professor at the Johns Hopkins Carey Business School. “In a way, there’s anonymity in the crowd — you don’t know who’s more guilty than others.”
Although UBS wasn’ t charged for currency manipulation, the government said the Swiss bank engaged in deceptive currency trading and sales practices after it settled a previous investigation in the manipulation of the London interbank offered rate in 2012.
Bank executives expressed embarrassment and frustration over the conduct, pointed a finger at a few bad apples and vowed to do better.
“The conduct of a small number of employees was unacceptable and we have taken appropriate disciplinary actions,” UBS chief executive Sergio Ermotti and Chairman Axel Weber said.
This is a very calculated move to get the Justice Department off their backs