Half assed bank investigation produces £2.6bn fine

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Half assed bank investigation produces £2.6bn fine

Post by Irbis » 2014-11-28 07:00pm

Six banks fined £2.6bn by regulators over forex failings

Six banks have been collectively fined £2.6bn by UK and US regulators over their traders' attempted manipulation of foreign exchange rates.

HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase, Citibank and Bank of America have all been fined.

A separate probe into Barclays is continuing.

The fines were issued by the UK's Financial Conduct Authority (FCA) and two US regulators.

The country's Commodity Futures Trading Commission (CFTC) issued fines of $1.4bn to five banks, while the Office of the Comptroller of the Currency (OCC) added $950m in further fines to three lenders.

Separately, the Swiss regulator, FINMA, has penalised UBS 134m Swiss francs.

Barclays, which had been expected to announce a similar deal to the other banks, said it would not be settling at this time.

"After discussions with other regulators and authorities, we have concluded that it is in the interests of the company to seek a more general coordinated settlement," it said in a statement.

FCA boss Martin Wheatley told the BBC: "This isn't the end of the story."

"The individuals themselves will face the consequences," he said.

Several senior traders at the banks have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme.
Failings 'undermine confidence'

The fines follow a 13-month investigation by regulators into claims that the foreign exchange market - in which banks and other financial firms buy and sell currencies between one another - was being rigged.

The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets.

About 40% of the world's dealing is estimated to go through trading rooms in London.

There is no physical forex marketplace and nearly all trading takes place on electronic systems operated by the big banks and other providers.

Daily "spot benchmarks" known as "fixes" are used by a wide range of financial and non-financial firms to, for example help value assets or manage currency risk.

The FCA fined the five banks a total of £1.1bn, the largest fine imposed by it or its predecessor, the Financial Services Authority.

"At the heart of today's action is our finding that the failings at these banks undermine confidence in the UK financial system and put its integrity at risk," the FCA said.

The US regulator, the Commodity Futures Trading Commission (CFTC), has fined the same banks a total of more than $1.4bn (£900m).

"The setting of a benchmark rate is not simply another opportunity for banks to earn a profit. Countless individuals and companies around the world rely on these rates to settle financial contracts," said the CFTC's director of enforcement Aitan Goelman.

Another US regulator, the Office of the Comptroller of the Currency (OCC), fined Citibank, JP Morgan Chase and Bank of America a further $950m (£600m).

All three regulators found the attempted manipulation of the foreign exchange market had been going on for several years, with the FCA saying the failings occurred between 1 January 2008 and 15 October 2013. The CFTC said its investigation found the traders' misconduct took place between 2009 and 2012.

They found certain foreign exchange traders at the banks had coordinated their trading with one another to attempt to manipulate benchmark foreign exchange rates.

The CFTC said traders had used private online chat rooms to communicate. They had disclosed confidential customer order information and trading positions, and altered their positions accordingly to "benefit the interests of the collective group".

The FCA said the "tight knit groups" formed by traders at the different banks had described themselves as "the 3 musketeers", "the A-team" and "1 team, 1 dream".

It said traders had attempted to manipulate the relevant currency rate in the market, for example to ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate it had bought the currency. "If successful, the bank would profit," the FCA added.

CFTC example of private chat room conversation:

Bank R Trader: 4:00:35 pm: well done gents
Bank W Trader 1: 4:01:56 pm: hooray nice team work
Bank U Trader: 4:02:22 pm: nice one mate

Another example:

Bank V Trader: 4:00:51 pm: have that my son
Bank V Trader: 4:00:52 pm: hahga
Bank V Trader: 4:00:56 pm: v nice mate
Bank U Trader: 4:04:53 pm: that worked nice mate
Bank V Trader: 4:05:44 p.m.: big time mate.


However, Professor Mark Taylor, a former foreign exchange trader and now dean at Warwick Business School, said the fines were "relatively small beer for banks that regularly report billions of dollars in annual profit".

"The interesting thing is that there are no individuals named as yet, and no individual prosecutions. This is still a possibility and it will be interesting to see how that pans out. At the moment, it's really only the shareholders - which in the case of RBS means British taxpayers - who suffer from these fines," he added.

For the opposition, shadow chancellor Ed Balls described the affair as "yet another shocking scandal involving the banks and underlines the need for fundamental reform and cultural change".

"This report shows that reform of our banks has a long way to go. We need reforms to pay and bonuses, with more transparency, greater clawback and a tax on bank bonuses," he added.
I actually saw how it looks first-hand as 5 years ago Polish currency was object of big financial attack. Long story short, it unnaturally strengthened over 60% (from 1$ costing 3.5 zł to 1.95 zł) driving a lot of local companies out of business and massively inflating imports (I, too, bought four digit 17" gaming laptop from USA that cost 3x less than comparable machines here).

Big crisis, a lot of people out of work, just so that a few fat assholes could collect bigger check. I wonder how liberturds would have explained that one - since regulation is evil, and freedom of capital investment holy, I guess victims just didn't worked hard enough or something :roll:

Anyway. As always, it's the taxpayer who bears the whole burden. Why I am not surprised? What is scary, is that a small, half-assed investigation of just 6 companies with small % fine produced such sum. Why we need massive unstable parasitic funds that make market warped and unpredictable, again? If I were cynic, I'd say someone was bribed. Or that UK/USA love their financial nuclear weapons that can ruin economy of any country that is currently on Axis Of Evil™ lists too much. But I guess you can't exclude simple incompetence either.

In another news, 30 other banks managed to lie their way out of fine. What a relief, we wouldn't want any bankster to lose even a cent over this. Oh, wait, they already walk away smelling like roses, normal law is for losers :roll:

And to think UK lied about its economy being overrated and budget incapable of paying EU share, when a single poke into City produced sum twice as big. Maybe, just maybe they wouldn't have any problems with EU and social services if they spent half the time they spent whining actually properly regulating and taxing the City, eh?

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Re: Half assed bank investigation produces £2.6bn fine

Post by Jaepheth » 2014-12-07 02:24pm

It doesn't seem to estimate how much the banks made from their schemes.

If the fines are less than the profit then how are the fines going to be effective?

I think the fines should be punitive and added on TOP of seizing all the ill gotten gains.
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Re: Half assed bank investigation produces £2.6bn fine

Post by General Brock » 2014-12-07 11:39pm

It really doesn't help that bankers seem predisposed to dishonest behavior, and if not, can be trained to do so.

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Re: Half assed bank investigation produces £2.6bn fine

Post by Simon_Jester » 2014-12-08 10:28am

That study could also be explained by the fact that, as an industry where you can make huge piles of money by being a trickster, it attracts trickster with a strong desire for money...
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Re: Half assed bank investigation produces £2.6bn fine

Post by General Brock » 2014-12-12 11:06pm

And what tricksters they are.

In November, the G20 approved Cypriot haircuts for everybody, but the headlines were mostly about 'shirtfronting' Putin.

Now the U.S. government has passed legislation in its main budget bill allowing banks to foist derivatives speculation on the public dime. Senator Warren was almost able to stop it. Its coming to Canada and other Western nations as well.

Its unclear if or when the trillion-dollar derivatives bubble will pop, but the bankster class plans to share the pain, if nothing else.

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