Banks face US lawsuit over fixing

Multimillion-pound claim over manipulation of currency market

THE Royal Bank of Scotland, Barclays and HSBC are bracing themselves for a multimillion-pound lawsuit from a US legal firm after they manipulated the foreign exchange (forex) market.

The part-taxpayer-owned RBS has already been hit with a £430 million fine.

Other banks involved included JP Morgan and Citigroup.

Connecticut-based Scott + Scott now has the banks in their sights after it won an agreement that resulted in a number of major banks paying investors almost $2 billion (£1.3 billion) to settle a civil lawsuit tied to allegations that traders manipulated the currency market.

Now the law firm’s managing partner David Scott is in London, before travelling to Paris and Berlin, talking to major firms who want to launch a European action.

He said complainants are likely to include multinational businesses, pension funds and even central banks, although he would not say if the Bank of England is involved in the case. Mr Scott said: “To date, every regulator in the world has found a number of banks guilty of manipulating foreign exchange (forex) rates, with damages suffered by the clients amounting to billions of dollars. We are already being contacted by investors and firms to help assess their losses.”

Mr Scott said: “We have met with central banks and they have expressed an interest – they are interested in the institutional knowledge that we have gained litigating the forex case in the US.

“We have developed a model that allows us to give a pretty good idea of what their damages are if they traded foreign currency.”

The Financial Conduct Authority and other world regulators fined six major banks in November, including RBS and HSBC, £2.6bn over forex rigging.

Traders under swashbuckling nicknames such as the ‘’3 musketeers’’ were found to have clubbed together to rig forex.

In May, Barclays also agreed a £1.53bn fine with US and UK authorities amid a raft of new settlements with banks over their involvement in the rigging of global currency markets.

Mr Scott said: “The people who are ultimately the victims of the conspiracy do not know it.”

He added that, because the foreign exchange market “is so large, the banks and traders did not need to bludgeon somebody over their head to steal their money”.

Mr Scott said: “They just needed to make small paper cuts and bleed people very slowly. The customers had no idea they were being defrauded.”

Scott + Scott expects to launch its European complaint in the autumn.

Meanwhile, the former chairman of HSBC has said the bank should have taken more care before the purchase of a Swiss private banking business that allegedly allowed customers to dodge taxes.

In evidence to the House of Lords Economic Committee, Stephen Green added that they should also have carried out due diligence on a Mexican business that breached anti-money laundering rules. He said: “With the benefit of hindsight, it would have been better to have drilled into the detail much earlier. We didn’t get everything right.”

The twin scandals damaged HSBC’s image and Mr Green’s reputation. It came after the bank had come through the 2008 financial crisis relatively unscathed.