Citibank, HSBC, J.P. Morgan Chase, Royal Bank of Scotland and UBS received a combined $3.4 billion in penalties from U.S., U.K. and Swiss regulators for manipulating foreign exchange benchmark rates to benefit certain traders from 2008 to 2013.
Separately, the U.S. Treasury Department’s Office of the Comptroller and Currency issued a combined $950 million in penalties against Citibank, J.P. Morgan Chase and Bank of America for “unsafe and unsound” FX trading practices.
The U.S. Commodities Futures Trading Commission imposed penalties of $310 million each on Citibank and J.P. Morgan; $290 million each on RBS and UBS; and $275 million on HSBC, said a news release from the agency.
In the U.K., the Financial Conduct Authority said in a separate release it fined Citibank £226 million ($358 million); UBS, £233 million; J.P. Morgan, £222 million; RBS, £217 million; and HSBC, £216 million.
The Swiss Financial Market Authority fined UBS $138 million.
The OCC fined Citibank and J.P. Morgan $350 million each, and Bank of America, $250 million.
All regulators issued cease-and-desist orders requiring the banks to enhance oversight of their FX trading activity.
The CFTC and FCA will require the five banks to strengthen internal controls and procedures "to ensure the integrity of their participation in the fixing of foreign exchange benchmark rates and internal and external communications by traders,” according to the CFTC.
The FCA in its release said the banks "failed to manage obvious risks around confidentiality, conflicts of interest and trading conduct.”
The CFTC said the banks’ FX traders tried to manipulate the World Markets/Reuters Closing Spot Rates, which it said is used to set the relative values of different currencies and is the most widely referenced FX benchmark rates in the U.S. and globally. It said the banks’ FX traders used private chat rooms to plan the manipulation of the FX benchmark rates, disclose confidential order information and trading positions, altered trading positions to accommodate the group’s interests and agreed on trading strategies.
The CFTC and FCA said all five banks cooperated in the investigation; the CFTC also said UBS was the first to report the misconduct to the agency.