Member Article

Five banks fined £1.1 billion by the FCA for foreign exchange failings

The Financial Conduct Authority has fined five banks £1.1 billion for failing to properly control foreign exchange trading operations.

HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase and Citibank have all been fined by the UK financial watchdog, in the largest fines ever imposed by the FCA or its predecessor.

A separate probe into Barclays is continuing over its wider foreign exchange practices.

The FCA said they had investigated and taken action against the banks “where we found the worst misconduct.”

They are charged with attempting to rig the foreign exchange market and failing to manage “obvious risks” around confidentiality, conflicts of interest and trading conduct.

Their statement said they are “launching an industry-wide remediation programme to ensure firms address the root causes of these failings and drive up standards across the market.

“We will require senior management at firms to take responsibility for delivering the necessary changes and attest that this work has been completed.”

The US regulator, the Commodity Futures Trading Commission, has fined the same banks $1.4 billion.

“Today’s fine marks 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,” said FCA chief executive Martin Wheatley.

The failings occurred between 1 January 2008 and 15 October 2013, the FCA found.

The FCA said the banks had not “exercised adequate and effective control” over their foreign exchange trading businesses, training was “insufficient” and that the “right values and cultures” were not sufficiently embedded in the banks’ foreign exchange businesses.

The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets.

About 40% of the world’s dealing is estimated to go through trading rooms in London.

The FCA’s investigation focused on electronic communications between traders, including instant messaging systems and online chat rooms.

Chancellor George Osborne said the fines were part of a “long term plan that is fixing what went wrong in Britain’s banks and our economy”.

“All of this action means the world can have confidence in the integrity of Britain’s financial markets,” he added.

Several senior traders have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme.

This was posted in Bdaily's Members' News section by Clare Burnett .