Regulation  

HSBC ups UK redress to £580m amid FCA forex discussions

HSBC has set aside £236m for the Financial Conduct Authority’s investigation into foreign exchange manipulation, as the lender warns it is likely to involve the payment of a “significant financial penalty”.

Results for the nine months to the end of September reveal the bank has set aside £584m for its UK customer redress programme, compared to £525m in the same period last year. Globally HSBC set aside more than $1.6bn to cover legal settlements and customer compensation.

The interim management statement discloses discussions with the FCA regarding a “proposed resolution” of a foreign exchange investigation “relating to one part of its spot FX trading business” in London.

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“Although there can be no certainty that a resolution will be agreed, if one is reached the resolution is likely to involve the payment of a significant financial penalty.

“We continue to cooperate fully with regulatory and law enforcement authorities in the UK and other jurisdictions.”

HSBC’s UK profits before tax fall to £1.21bn compared to £1.5bn at the end of September 2013, while underlying profit before tax of £1.16bn at the end of September 2014 also fell from £1.95bn. The lender also saw its UK bank levy jump from £5.6m to £28.1m.

Last month, the FCA launched a number of investigations alongside both UK and foreign agencies relating to trading on the international foreign exchange markets.

The UK conduct regulator confirmed that it was launching a range of formal probes following a preliminary investigation in June that came in the wake of complaints alleging that banks had been attempting to manipulate currency benchmarks.

At the weekend the Telegraph reported that taxpayer-backed Lloyds’ own internal investigation had found “no wrongdoing” over forex trading and that it did not anticipate any action from the regulator. Barclays and RBS have previously set aside £500m and £400m respectively.

According to FTAdviser sister title the Financial Times, the Hong Kong Monetary Authority is also investigating the alleged manipulation of foreign exchange markets. The Swiss regulator has also previously confirmed it is looking into forex trading.

The investigation is focusing on around eight of the larger operators in the multi-trillion global currency market, the FT said, including banks such as Citigroup, Deutsche Bank, JPMorgan Chase, UBS and Barclays.

RBS confirmed to the FT that it is involved in the probe. It said: “Our ongoing inquiry into this matter continues and we are co-operating fully with the FCA and our other regulators.”

donia.o’loughlin@ft.com

Additional reporting by Ashley Wassall