The Financial Conduct Authority has imposed fines totalling £1.1bn on five banks for failing to control business practices in their G10 spot foreign exchange (FX) trading operations.
Citibank has been fined £225m, HSBC Bank £216m, JPMorgan Chase Bank £222m, The Royal Bank of Scotland £217m and UBS £233m. The banks agreed to settle at an early stage and therefore qualified for a 30 per cent discount.
The fines are the largest ever imposed by the FCA, or its predecessor the Financial Services Authority, and marks the first time the regulator has pursued a settlement with a group of banks in this way.
In relation to Barclays Bank, the FCA stated that it will progress its investigation covering G10 spot FX trading business and wider FX business areas.
Barclays released a statement which explained that it has “engaged constructively” with its regulators in the UK and US, considering a settlement on similar terms to that paid by the other banks.
The investigation was undertaken in cooperation with the US Commodity Futures Trading Commission, which separately imposed a total financial penalty of over $1.4 billion on the banks, and Swiss Financial Market Supervisory Authority, which imposed a penality of CHF134 million on UBS.
The UK regulator said it is also launching an “industry-wide remediation programme” to ensure firms address the root causes of these failings, which will require senior management to “take responsibility” and complete attestations to state this work has been completed.
Between 1 January 2008 and 15 October 2013, ineffective controls allowed G10 spot FX traders to put their banks’ interests ahead of those of their clients, other market participants and the wider UK financial system.
The investigation focused on the G10 currencies - which are the most widely-used and systemically important - and on the 4pm WM Reuters and 1:15pm European Central Bank fixes.
The banks shared information about clients’ activities which they had been trusted to keep confidential and attempted to manipulate G10 spot FX currency rates, including in collusion with traders at other firms, in a way that could disadvantage those clients and the market.
Martin Wheatley, chief executive of the FCA, said: “Today’s record fines mark 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.
Tracey McDermott, the FCA’s director of enforcement and financial crime, added: “Firms could have been in no doubt, especially after Libor, that failing to take steps to tackle the consequences of a free for all culture on their trading floors was unacceptable.
This is not about having armies of compliance staff ticking boxes. It is about firms understanding, and managing, the risks their conduct might pose to markets.”