Royal Bank of Scotland and HSBC are among six major international banks given record fines totalling £2.6bn for rigging the foreign exchange markets.
The manipulation – which was still taking place as recently as last year – is the latest in a series of scandals that have shamed the City and helped nurture a public image of bankers as greedy and self-interested. Tonight there were calls for the authorities to bring criminal actions against the banks and individuals responsible – with campaigners pointing out that the fines are an insufficient deterrent for profitable institutions.
“This isn’t the end of the story,” said Financial Conduct Authority (FCA) boss Martin Wheatley. “The individuals themselves will face the consequences.”
Regulators in the UK, Switzerland and the US all levied fines early today, while a further Wall Street regulator added nearly $1bn (£630m) more in the afternoon. In addition to the UK banks, Citibank, JPMorgan Chase, Bank of America and UBS all accepted fines for wrongdoing between 2008 and 2013.
The regulators published lurid details of how the traders gave themselves childish names like “the A-Team”, “the Three Musketeers” and “One Team, One Dream” as they worked together to rig the values of major currency rates such as the pound-dollar in order to boost their profits.
The traders boasted of their activities in specialist City electronic chatrooms and cajoled each other into helping manipulate the markets – often at the expense of their clients. Foreign exchange rates are used in millions of transactions every day, by tourists to traders, and it is critical that they can be trusted.
The Serious Fraud Office is also investigating whether it can bring criminal actions over the case. The scandal, falling so soon after the Libor rate-fixing affair, is deeply embarrassing for the City of London, which accounts for 40 per cent of the £3.3trn of currency traded around the world each day.
The RBS chief executive Ross McEwan said: “To say I am angry would be an understatement. We had people working at this bank who did not know the difference between right and wrong.”
The Chancellor George Osborne, whose Treasury will receive the proceeds from the UK fines, said they were part of a “long-term plan that is fixing what went wrong in Britain’s banks and our economy”. The shadow Chancellor Ed Balls said: “This is yet another shocking scandal involving the banks and underlines the need for fundamental reform and cultural change.”
Ralph Silva, a banking analyst, pointed out how small the fines were relative to the size of the banks and that they were not enough to act as a disincentive to others. He said: “Are regulators short of handcuffs? They manipulated the world economy; fines are not enough.”
The FCA responded that the Serious Fraud Office was investigating the affair and said that the fines were accompanied by demands to carry out major changes to the way the banks work.
As with many of the banking scandals that have been explored by investigators since the financial crisis, there were no shortage of “smoking guns” in the chatrooms through which the collaboration was organised.
After one particularly effective rigging campaign involving HSBC and three other firms, the traders involved managed to get the pound-dollar rate down from 1.6044 to just 1.6003 by sharing information about their clients’ buying and selling and agreeing to carry out their own trades to move the rate to where they wanted it. Within minutes, HSBC alone made a profit of $162,000 (£103,000).
Of the UK banks, HSBC got hit for £216m in the UK and $275m in the US, RBS for £217m in Britain and $290m in the US.
‘Have that my son’: What the traders said
Transcripts released by the Financial Conduct Authority yesterday show the level of collusion that took place between traders at banks including HSBC and Royal Bank of Scotland.
After one fix involving HSBC, traders congratulated each other by saying: “Nice work gents… I don my hat,” “Hooray nice team work,” “Bravo… cudnt been better,” “Have that my son…v nice mate” and “Dont mess with our ccy [currency].” One commented: “There you go… go early, move it, hold it, push it.” In response, the HSBC trader responded: “Loved that mate… worked lovely.”
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