The Financial Conduct Authority (FCA) has imposed fines totalling £1,114,918,000 on five banks for failing to control business practices in their G10 spot foreign exchange (FX) trading operations.
Citibank was fined £225,575,000; HSBC Bank £216,363,000; JPMorgan Chase £222,166,000; Royal Bank of Scotland £217,000,000 and UBS £233,814,000.
In addition, Barclays Bank is still in negotiations with the regulator.
The regulator said the banks’ FX failings undermine confidence in the UK financial system and put its integrity at risk.
The Serious Fraud Office is also investigating.
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 obvious risks around confidentiality, conflicts of interest and trading conduct.
Traders shared information about clients’ activities which they had been trusted to keep confidential and attempted to manipulate G10 spot FX currency rates, including in collusion with traders at other firms, in a way that could disadvantage those clients and the market.
The fines are the largest ever imposed by the FCA, or its predecessor the Financial Services Authority (FSA), and this is the first time the FCA has pursued a settlement with a group of banks in this way. It has worked closely with other regulators in the UK, Europe and the US: today the Swiss regulator, FINMA, has fined UBS CHF 134 million and, in the US, the Commodity Futures Trading Commission ( CFTC) has imposed a total financial penalty of over $1.4 billion on the banks.
Martin Wheatley, chief executive of the FCA, said: “The FCA does not tolerate conduct which imperils market integrity or the wider UK financial system. 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 or leave the ethics of their conduct to compliance to worry about. Senior management commitments to change need to become a reality in every area of their business.
“But this is not just about enforcement action. It is about a combination of actions aimed at driving up market standards across the industry. All firms need to work with us to deliver real and lasting change to the culture of the trading floor. This is essential to restoring the public’s trust in financial services and London maintaining its position as a strong and competitive financial centre.”
Tracey McDermott, the FCA’s director of enforcement and financial crime, added: “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.”