Big Banks Fined by EU for Foreign-Exchange Misconduct -- Update
May 16 2019 - 10:13AM
Dow Jones News
By Patricia Kowsmann in Frankfurt and Margot Patrick in London
European Union authorities on Thursday fined five global banks a
total of EUR1.07 billion ($1.2 billion) for manipulating the
foreign-currency market by exchanging sensitive information and
trading plans through online chat rooms to gain financially.
Citigroup Inc., JPMorgan Chase & Co., Barclays PLC, Royal
Bank of Scotland Group PLC and Japan's MUFG Bank Ltd. are paying
between EUR69.7 million ($78.1 million) and EUR310.7 million under
settlements with the European Commission. UBS Group AG, which in
2013 revealed the existence of two cartels formed by the banks, has
received full immunity and avoided EUR285 million in fines, the
commission said.
Citigroup, which is paying the top fine of EUR310.7 million, and
Barclays declined to comment. An RBS spokesman said the fine is a
reminder of how badly the bank "lost its way" in the past.
A JPMorgan spokesman said one former employee was involved in
the case, adding "we have since made significant control
improvements." A spokeswoman for MUFG said it had taken "a number
of measures to prevent this occurring again."
The manipulation involved 11 currencies, including the euro,
U.S. dollar and British pound, and took place between 2007 and
2013. It involved foreign exchange spot order transactions, which
are executed on the same day at the prevailing exchange rate. The
commission said individual traders at the five banks exchanged
information in a way that allowed them to coordinate whether and
when to sell and buy the currencies for their advantage.
Most of the traders knew each other outside work, the commission
said, including from commuting by train into London. The chat
rooms, with colorful names such as "Three Way Banana Split" and
"Semi Grumpy Old Men, " were kept open on the traders' screens all
day, and they would post regular updates on their trading
activities, the commission said.
The European Commission is one of the last global authorities to
impose a large fine over behavior in foreign exchange trading
markets that first came to light in 2013 and takes the total tab
paid by banks over $11 billion. The commission opened an
investigation that year but its findings come years after banks
settled similar allegations in the U.S. and U.K. The commission
said it hasn't completed its work, though.
"The commission will continue pursuing other ongoing procedures
concerning past conduct in the Forex spot trading market," it said.
HSBC Holdings PLC earlier this year said it also had been asked by
the European Commission for information around potential
coordination in foreign-exchange options trading.
The European Commission has a separate open probe into possible
collusion among global banks to manipulate markets of U.S.
dollar-denominated supra-sovereign, sovereign and so-called SSA
bonds, which are issued by entities like the World Bank and
European government agencies.
Online chat rooms, in which traders often showed little interest
in covering up their activities, turned into a treasure trove of
evidence for investigators.
In 2015, when Barclays, Citigroup, JPMorgan and Royal Bank of
Scotland settled a similar forex manipulation case in the U.S.
paying over $5 billion in fines, documents showed much of the
information exchanged among traders happened in an electronic chat
room known by participants as "The Cartel" or "The Mafia."
Connecticut-based law firm Scott+Scott LLP, which helped secure
$2.3 billion in settlements for clients in the U.S. case, said it
would begin recovery action in Europe on behalf of non-U.S. pension
funds, asset managers and companies.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com and
Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
May 16, 2019 10:58 ET (14:58 GMT)
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