Risk & Compliance

Five Banks to Pay $5.6B Over Rate-Rigging

Plea agreements resolve U.S. allegations that the banks manipulated foreign currency exchange and interest rates.
Katie Kuehner-HebertMay 20, 2015

Five major banks have agreed to pay about $5.6 billion in fines to settle allegations that they manipulated foreign currency exchange and interest rates.

As part of the settlements,  four of the banks Citicorp, JPMorgan Chase, Barclays, and The Royal Bank of Scotland were expected to plead guilty Wednesday to criminal charges filed by the U.S. Department of Justice.

They were accused of conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange spot market. The criminal fines against them total more than $2.5 billion.

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The fifth bank, UBS, has agreed to plead guilty to manipulating the London Interbank Offered Rate, or LIBOR, and other benchmark interest rates and pay a $203 million criminal penalty.

Growth in Banking Regulatory Fines (2008 – 2015) | Credio

“Today’s historic resolutions … serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers,” Attorney General Loretta Lynch said in a news release.

The penalties imposed on the banks for their “egregious” conduct, she added, “should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare.”

According to the plea agreements, euro-dollar traders at Citicorp, JPMorgan, Barclays and RBS – self-described members of “The Cartel” – used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates.

“’The Cartel’ traders coordinated their trading of U.S. dollars and euros to manipulate the benchmark rates set at the 1:15 p.m. and 4 p.m. fixes in an effort to increase their profits,” the Justice Department said in a news release.

Members of “The Cartel” also allegedly manipulated the euro-dollar exchange rate by agreeing not to buy or sell euros or dollars at certain times to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators.

Separately, the U.S. Federal Reserve on Wednesday announced it was imposing fines of over $1.6 billion on the five banks. Barclays settled related claims with the New York State Department of Financial Services, the Commodity Futures Trading Commission, and the U.K.’s Financial Conduct Authority for an additional combined penalty of about $1.3 billion.