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Barclays fined for forex rigging

Published 20/05/2015

Barclays' penalty includes a record £284.4 million to the UK's Financial Conduct Authority
Barclays' penalty includes a record £284.4 million to the UK's Financial Conduct Authority

Barclays was among six banks whose traders colluded under chatroom nicknames such as "The Cartel" to rig foreign exchange rates that were fined 5.7 billion US dollars (£3.7 billion) for their part in the scandal.

In the final settlements under the foreign exchange (forex) market probe, Barclays agreed a £1.53 billion fine with US and UK authorities, including £284.4 million to Britain's Financial Conduct Authority (FCA) - the highest penalty ever imposed by the regulator.

The group also pleaded guilty to a violation of US anti-trust law.

Royal Bank of Scotland was among five other banks also hit with penalties, agreeing to pay a further 669 million US dollars (£430 million) to US authorities, which comes on top of a £ 399 million penalty last November to regulators on both sides of the Atlantic.

US banks JP Morgan Chase & Co, Bank of America and Citigroup as well as Swiss bank UBS were also hit with fines in the latest round of settlements, which is expected to mark the last of the big investment bank penalties in what has become one of the most expensive banking scandals in history.

The fines follow November's cross-Atlantic fines of £2.6 billion for six banks - including £1.1 billion by the FCA.

Investigators found traders from different firms formed groups under various names in order to help them manipulate currency exchange rates in the £3 trillion a day foreign exchange market to profit the banks at the expense of clients.

US regulators found that t raders used an invitation-only electronic chatroom and coded language to fix the price of US dollars and euros between December 2007 and January 2013.

One Barclays' employee was quoted in a chat saying: "If you ain't cheating, you ain't trying." A foreign exchange trader wrote: "The less competition the better."

US regulators also found that one Barclays' employee, when he became the main euro trader for the bank in 2011, was desperate to join an invitation-only chatroom of traders known as the "Cartel".

He was given a one-month trial period but was warned: "Mess this up and sleep with one eye open at night."

The Barclays' settlement is greater than the other banks as it held off from agreeing fines in the previous round announced in November.

Georgina Philippou, the FCA's acting director of enforcement and market oversight, said: "This is another example of a firm allowing unacceptable practices to flourish on the trading floor.

"Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm's interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system."

The FCA said its fine would have been 20% higher - at £335.5 million - if Barclays had not settled when it did.

A spokesman for the Treasury said: "The Government created the tough new Financial Conduct Authority (FCA) and gave it strong powers to take action wherever its rules are breached.

"The action taken on foreign exchange failings today, and in November last year, shows that the new, tougher regulatory system is working."

Four of the banks involved in the US and UK settlements - JP Morgan, Barclays, Royal Bank of Scotland Group and Citigroup will plead guilty to conspiring to manipulate the price of US dollars and euros.

US regulators said that Barclays had terminated four employees - three in London and one in New York - this month and urged the bank to fire four more who are currently based in New York.

Antony Jenkins, chief executive at Barclays, apologised for the bank's role in the scandal.

He said: "The misconduct at the core of these investigations is wholly incompatible with Barclays' purpose and values and we deeply regret that it occurred."

He added: "I share the frustration of shareholders and colleagues that some individuals have once more brought our company and industry into disrepute."

As well as the FCA, Barclays has now settled with US authorities including the Department of Justice (DoJ) and Commodities Future Trading Commission (CFTC).

RBS has also so far dismissed three staff and a further two are suspended.

Ross McEwan, chief executive at RBS, said: "The serious misconduct that lies at the heart of today's announcements has no place in the bank that I am building.

"Pleading guilty for such wrongdoing is another stark reminder of how badly this bank lost its way and how important it is for us to regain trust."

Shares in London-listed Barclays and RBS rose 3% and 2% respectively as the settlements are expected to draw a line under the affair.

But investigations are ongoing against individuals, with the Serious Fraud Office among those conducting inquiries.

Shadow chancellor Chris Leslie said: "Surely the time has come for fundamental reform and tougher penalties for banking misconduct?

"If ever there was an example of appalling collusion between bankers putting their own interests ahead of customers, then this is it.

"Ministers refused to act in 2012 when we pressed for broader regulation of financial benchmarks such as those in foreign exchange. We now find out this activity was going on as recently as last year.

"We need to rebuild the reputation of British banking, which plays such a crucial role in our economy."

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