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Record fine for FX fixing

Wednesday, November 12, 2014 - 02:20

Global regulators have imposed penalties totalling $3.4 billion on five major banks for failing to stop their traders from trying to manipulate foreign exchange rates. As Ciara Lee reports dozens of dealers have also been suspended or fired in connection with the largely unregulated $5 trillion-a-day market.

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TV AND WEB RESTRICTIONS~** Another scandal, another record fine The banking industry's bad boy image just took another beating. 5 of the world's biggest banks have been fined a total of 3.4 billion dollars. RBS, HSBC, Citi, UBS and JP Morgan all stung with bumper payouts for trying rig foreign exchange markets. The settlement comes after a year-long investigation. U.S. and UK watchdogs uncovered evidence that traders colluded via online chatrooms. They used code names such as "the 3 musketeers" and "the mafia" to share confidential information. Martin Wheatley is Chief Executive of the Financial Conduct Authority. SOUNDBITE (English) MARTIN WHEATLEY, CHIEF EXECUTIVE, FCA, SAYING: "The bank's failures to establish adequate systems and controls are what allowed the traders to manipulate the fixed rates across the world's largest currencies and failings like this seriously undermine confidence in the market and undermine the attempts to genuinely reform banking culture." SOUNDBITE (English) REUTERS REPORTER CIARA LEE, SAYING: "Here in London Britain's regulator the FCA- dished out 1.7 billion dollars of the fines. It's by far the biggest penalty in UK history - more than double that for Libor - but compared to the market as a whole, it's still just a drop in the ocean." The forex market sees 5 trillion dollars of deals done every day 40 percent of those flow through London, and the scandal could damage the city's reputation as the global forex hub. The FCA will also launch a review of the spot FX industry meaning firms will have to scrutinise their systems. That could involve them looking at how they do things in other markets such as derivatives and precious metals. A clampdown on chatroom use has also begun - and at least 30 foreign exchange traders have been fired or suspended. IG's Alastair McCaig. SOUNDBITE (English) IG MARKET COMMENTATOR, ALASTAIR MCCAIG, SAYING: "I do think we are going to see quite a few people sitting very nervously in their seats as far as these decisions are concerned. There hasn't been just stepping over the line as it were, there's been wholesale shifts of desks sitting on the wrong side of the line." Barclays had been expected to be part of the settlement but the FCA's investigation there is still ongoing. With the UK settlement out of the way, the focus now shifts to ongoing criminal investigations in the Uk and the U.S. along with potential civil law suits.

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Record fine for FX fixing

Wednesday, November 12, 2014 - 02:20