Banks fined £2bn over forex scandal
Five banks that employed traders who clubbed together to rig foreign exchange (forex) rates under swashbuckling nicknames such as "A-team" and "3 musketeers" were fined more than £2 billion today.
Regulators discovered that some of the manipulation of the £3 trillion-a-day forex market was taking place even as the banks were being probed over a previous scandal over interbank lending rate Libor.
Royal Bank of Scotland, HSBC, Citibank, JP Morgan Chase and UBS were handed penalties totalling a record £1.1 billion by Britain's Financial Conduct Authority (FCA) and 1.5 billion US dollars (£927 million) by US authorities.
Britain's Serious Fraud Office and the US Department of Justice are among the other authorities still looking into the scandal.
Investigators found traders from different firms formed groups under various names in order to help them manipulate currency exchange rates that would profit the banks at the expense of clients.
Transcripts of conversations held in chat rooms and disclosed by the FCA today show how the traders referred to "free money" and not wanting other "numpties" in the market to know about information within their group.
Using jargon such as "betty" to described sterling, they plotted to rig the rates and congratulated each other when successful - such as in one episode which generated a profit of 615,000 US dollars (£389,000) for RBS.
Transcripts revealed traders saying "I don my hat" and "[RBS] is god".
Today the bank's chief executive Ross McEwan said after it was fined £399 million: "To say that I am angry about the misconduct would be an understatement.
"We had people working at this bank who did not know the difference between right and wrong, or worse, didn't care about the distinction."
City commentator Louise Cooper said the traders - who formed tight-knit groups with names such as "the players" and "1 team 1 dream" - sounded like "kids let loose in a terribly expensive sweetie shop".
"These are not the monikers of serious financial professionals, more like sniggering school boys doing naughty things."
The FCA said that the failure by the banks to control business practices undermined confidence in UK financial markets and put its integrity at risk, with 40% of forex trading taking place in London.
Its 13-month probe involved 70 enforcement staff. The findings of the investigation cover a period from January 2008 to October 2013.
Apart from issuing a record series of fines, the FCA has launched an industry-wide programme forcing banks to review their systems, controls and policies in foreign exchange trading.
The US Commodity Futures Trading Commission (CFTC) found some of the misconduct occurred in the same period the banks were on notice of regulatory probes into the Libor manipulation scandal which would see them fined billions of pounds.
FCA chief executive Martin Wheatley 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."
The fines from the UK regulator dwarf its previous total penalties of £532 million for the Libor scandal and also set new records for its fines for individual banks, with the previous highest being £160 million.
It found that corrupt traders shared client information to work out trading strategies as they attempted to ensure that the rate at which the bank had agreed to sell a particular currency to clients was higher than the average rate it had bought it for in the market.
If successful, the bank would make a profit.
The Bank of England was dragged into the scandal amid claims officials knew about the practices. A review today found that while none were aware of "improper conduct", one member of staff failed to raise the alarm about traders sharing information.
It said that its chief foreign exchange dealer Martin Mallett, who was suspended in March, had been fired yesterday for "a failure to adhere to internal policies" but said it was "not at all related" to the forex probe.
RBS, 80% owned by the taxpayer, was fined a total of £399 million including £217 million by the FCA and 290 million US dollars (£182 million) by the CFTC.
Mr McEwan said those responsible would have bonuses clawed back or face disciplinary procedures. The bank said six were undergoing a disciplinary process, with three suspended. A statement about the probe will follow by the end of the year.
The bank, which has analysed millions of documents, said it was reviewing the conduct of more than 50 current and former members of trading staff around the world as well as dozens of supervisors and senior management.
HSBC was fined £389 million including £216 million from the FCA and £173 million from the CFTC.
However Barclays, the third British bank expected to be fined, opted out of agreeing to a fine today, saying it was "in the interests of the company to seek a more general co-ordinated settlement" with more investigations from other authorities still to come.
It recently said it was setting aside £500 million to cover probes into the scandal.
Swiss bank UBS was fined a total of £503 million by UK, US and Swiss authorities. America's Citibank was hit with penalties of £420 million while JP Morgan Chase was fined £417 million.
Chancellor George Osborne said: "Today we take tough action to clean up corruption by a few so that we have a financial system that works for everyone."
Andrew Tyrie, chairman of the Commons Treasury Select Committee, said the "appalling" scandal was taking place even as banks were claiming "that they had got to grips with past misconduct".
Andrea Leadsom, Economic Secretary to the Treasury, told BBC Radio 4's Today programme the traders' behaviour was "disgusting" and would leave taxpayers "completely horrified".
"Throughout that period of the financial crisis where taxpayers were bailing out the financial system, there was still a group of foreign exchange traders, and other traders, who decided they would rig the system to suit their bonuses."
Shadow Chancellor Ed Balls said banking reform still had a long way to go.
He said: "This is yet another shocking scandal involving the banks and underlines the need for fundamental reform and cultural change."