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UK, US regulators penalise banks over FX operations failures

BBR Staff Writer Published 12 November 2014

The UK Financial Conduct Authority (FCA) has imposed a collective fine of £1.1bn on five banking giants over their failure to control business practices in their G10 spot foreign exchange (FX) trading operations.

Citibank was fined £225.5m, while HSBC, JPMorgan Chase, The Royal Bank of Scotland, and UBS were asked to pay penalties of £216.3m, £222.1m, £217m, and £233.8m, respectively.

An investigation by FCA found that the banks did not exercise adequate and effective control over their G10 spot FX trading businesses from January 2008 to October 2013, which enabled traders to put their banks' interests ahead of those of their clients, other market participants and the wider UK financial system.

The traders also allegedly attempted to manipulate G10 spot FX currency rates, including in collusion with traders at other firms, in a way that could disadvantage clients and the market.

FCA chief executive Martin Wheatley said: "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."

FCA is currently continuing investigation into Barclays, which will cover its G10 spot FX trading business and also wider FX business areas, and also committed to launch an industry-wide remediation programme to ensure firms address the root causes of these failings and drive up standards across the market.

Meanwhile, the US Commodity Futures Trading Commission (CFTC) has also imposed a $1.4bn penalty on the banks for attempted manipulation of FX benchmark rates, including the World Markets/Reuters Closing Spot Rates (WM/R Rates).

Specifically, Citibank and JPMorgan were ordered to pay $310m each, RBS and UBS were fined $290m, while HSBC will have to pay $275m to settle the charges.