LONDON (Reuters) - Britain’s financial regulator has intensified talks with six major banks over allegations of collusion and manipulation in the foreign exchange market, setting the stage for a group settlement that could cost them close to 2 billion pounds.
Britain’s Financial Conduct Authority (FCA) and the lenders are keen to draw a line under a scandal that has cast London, the world’s foreign exchange trading hub, in a negative light, ensnared the Bank of England and weighed on banks’ share prices.
The FCA met officials from UBS UBSN.VX, Barclays (BARC.L), HSBC (HSBA.L), Royal Bank of Scotland (RBS.L), JP Morgan (JPM.N) and Citi (C.N) this week and discussed the possibility of a group settlement that would see the banks fined different amounts depending on the gravity of the alleged misconduct, sources said.
The aggregate fine could come in at around 1.8 billion pounds with the maximum fine for one bank put forward of between 300 million and 400 million pounds and others pegged below 300 million, one source familiar with the matter said.
These figures, which are far larger than any individual fine previously levied by the FCA, include a 30 percent discount for early settlement, the source added.
Sky News, which first reported this week’s meetings, said a deal could cost lenders around 2 billion pounds and could be announced as soon as November.
Earlier this month, Reuters reported that banks were pushing for a coordinated settlement with the FCA, which was on track to be reached by the end of the year.
Two sources said on Friday that the “next step” in the FX talks could be in November, which is also when G20 leaders will sign off on proposals from global regulators to reform and strengthen the $5.3 trillion-a-day currency market.
The FCA and the banks declined to comment. The UK Treasury and Bank of England also declined to comment.
The FCA launched a probe last October into allegations that bank traders used advance knowledge of client orders to try and manipulate foreign exchange benchmarks.
In recent months, the investigation has focused on lax internal compliance, oversight failures and market conduct breaches by individual employees rather than deliberate manipulation of the market, sources have told Reuters.
The Bank of England (BoE) appointed a barrister in March of this year to examine whether any of its officials were involved in the alleged rigging.
One BoE employee was suspended earlier this year, pending an investigation into failings in the Bank’s “rigorous internal control processes”.
More than 30 traders from various banks have been put on leave, suspended, or fired. No individual or bank has been formally accused of any wrongdoing.
The FCA talks do not include the United States, where several authorities, including the Department of Justice, are also conducting their own investigations.
A global settlement is not expected, sources in London and Washington said, meaning that the U.S. investigations are likely to roll into 2015.
A spokesman for the Department of Justice in the United States declined to comment.
Earlier this week, Bank of England Deputy Governor Andrew Bailey said that better coordination between U.S. regulators and elsewhere was needed when levying fines on banks for misconduct to avoid making it harder to rebuild strength in the banking system.
“I am trying to build capital in firms and it’s draining out the other side (in fines and penalties),” Bailey said.
In their investigations into rigging of the London interbank offered rate or Libor, the FCA and U.S. authorities coordinated settlements on a case-by-case basis with the banks.
The FCA’s biggest sanctions for benchmark manipulation is the 160 million pound fine levied against UBS UBSN.VX in December 2012 for its role in Libor, followed by the 105 million pounds levied at Rabobank in October 2013, also for Libor.
Banking executives have been pushing for a coordinated settlement, keen to avoid any of them being singled out for particular acrimony and a repeat of the ongoing Libor probe, where fines and penalties drip out.
Barclays was the first bank to come clean on the Libor rigging scandal in the summer of 2012, making it the focal point for public and political anger and forcing the resignation of its then chief executive Bob Diamond.
Additional reporting by William Schomberg and David Milliken. Editing by Carmel Crimmins