The Financial Conduct Authority (FCA) has imposed fines totalling £1,114,918,000 ($1.7 billion) on five banks for failing to control business practices in their G10 spot foreign exchange (FX) trading operations: Citibank N.A. £225,575,000 ($358 million), HSBC Bank Plc £216,363,000 ($343 million), JPMorgan Chase Bank N.A. £222,166,000 ($352 million), The Royal Bank of Scotland Plc £217,000,000 ($344 million) and UBS AG £233,814,000 ($371 million) (‘the Banks’).
The G10 spot FX market is a systemically important financial market. At the heart of today’s action is the FCA’s finding that the failings at these banks undermine confidence in the UK financial system and put its integrity at risk.
In relation to Barclays Bank Plc, the FCA says it will progress its investigation into that firm which will cover its G10 spot FX trading business and also wider FX business areas.
In addition to taking enforcement action against and investigating the six firms where we found the worst misconduct, the FCA is launching an industry-wide remediation programme to ensure firms address the root causes of these failings and drive up standards across the market. It says it will require senior management at firms to take responsibility for delivering the necessary changes and attest that this work has been completed.
This complements the FCA’s ongoing supervisory work and the wider reforms to the fixed income, commodity and currency markets which are the subject of the UK Fair and Effective Markets Review.
Between 1 January 2008 and 15 October 2013, the FCA found that 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.
These failings, says the FCA, allowed traders at those banks to behave unacceptably: they 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.
Today’s 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. The FCA has worked closely with other regulators in the UK, Europe and the US: today the Swiss regulator, FINMA, has disgorged CHF 134 million ($138 million) from UBS AG; and, in the US, the Commodity Futures Trading Commission (‘the CFTC’) has imposed a total financial penalty of over $1.4 billion on the banks.