Thursday, December 4, 2014

FCA Fines Five Banks $1.7 Billion for FX Failings

Announces Industry-wide Remediation Programme

On November 12 2014, the UK’s Financial Conduct Authority issued Final Notices collectively imposing record fines totaling $1.7 billion on five global banking firms for alleged rigging of the FX market. The FCA found that the banks engaged in widespread conduct that put the banks’ interests ahead of those of their clients and other market participants.

The banks will split the fine as follows:

  • Citibank N.A. £225,575,000 ($358 million), 

  • HSBC Bank Plc £216,363,000 ($343 million), 

  • JPMorgan Chase Bank N.A. £222,166,000 ($352 million), 

  • The Royal Bank of Scotland Plc £217,000,000 ($344 million) and 

  • UBS AG £233,814,000 ($371 million)

This record-breaking fine is not the end of the FX scandal for the five banks, however. The US Department of Justice and the Federal Reserve are still leading criminal probes into the $5.3 trillion-a-day currency market.  Calling the G10 spot FX market “a systematically important financial market,” the FCA itself will continue its probe into the wider currency trading markets as well. The FCA expects all firms engaging in the currency markets to put in place effective structures and controls to address the root causes of the failings of the five banks in their FX dealings, and raise standards for compliance across the market.

"In addition to taking enforcement action against and investigating the six firms where we found the worst misconduct, we 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."

Besides the regulatory probes and remediation efforts, law suits from the banks’ clients and other market participants are in the works, and the five firms face the potential of a heavy burden of litigation over the next few years.