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Five banks hit with largest ever fine over FX failings

Julia Rampen
Written By:
Julia Rampen

The Financial Conduct Authority (FCA) and US authorities have hit five banks with fines totalling £2bn for failing to properly control their foreign exchange practices.

The FCA’s £1.1bn fine is a record for the UK watchdog. The US regulator, the Commodity Futures Trading Commission, has fined the same banks a total of more than $1.4bn (£900m), the BBC reports.

The FCA’s portion of the £2bn bill comprises £225m from Citibank, £216m from HSBC, £222m from JPMorgan Chase Bank, £217m from RBS and £234m from UBS. The fine is the largest ever penalty imposed by the FCA. 

The regulator is also continuing to investigate a sixth bank, Barclays.

It is launching an industry-wide programme forcing banks to address the root causes of the failings. 

The BBC reports separately, the Swiss regulator, FINMA, hashit UBS with a fine of 134m Swiss francs.

FCA director of enforcement and financial crime Tracey McDermott said: “Firms could have been in no doubt, especially after LIBOR, that failing to take steps to tackle the consequences of a free for all culture on their trading floors was unacceptable. This is not about having armies of compliance staff ticking boxes. 

“It is about firms understanding, and managing, the risks their conduct might pose to markets. Where problems are identified we expect firms to deal with those quickly, decisively and effectively and to make sure they apply the lessons across their business.  If they fail to do so they will continue to face significant regulatory and reputational costs.”

Between 1 January 2008 and 15 October 2013, ineffective controls at the Banks allowed G10 spot FX traders to put their banks’ interests ahead of those of their clients, other market participants and the wider UK financial system. The banks failed to manage risks regarding confidentiality, conflicts of interest and trading conduct.

Unacceptable behaviour identified by the FCA included traders sharing confidential information about clients’ activities, and colluding with traders at rival firms in a bit to manipulate the G10 spot FX currency rates.

As well as being the largest ever fine imposed by the FCA or its predecessor, the Financial Services Authority, it is also the first time the FCA has pursued a settlement with a group of banks in this way. It has worked closely with Swiss and US regulators, both of which have also imposed penalties on the offending banks.