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article imageSix banks fined over $4 billion after exchange rate manipulation

By Kev Hedges     Nov 13, 2014 in Business
Six giant banks have agreed to forfeit $4.33 billion to global regulators to resolve allegations that its traders tried to fiddle foreign exchange rates.
$1.4 billion of the fine needs to be paid to the U.S. Commodity Futures Trading Commission but the bulk of the fine ($1.75 billion) must be paid to the United Kingdom's Financial Conduct Authority. The banks involved in the scandal are UBS, Royal Bank of Scotland, JP Morgan Chase, Citibank and HSBC while an investigation of potential wrongdoing at Barclays Bank is currently ongoing.
Some $5 trillion is traded on markets around the world every single working day, most of it in London. Foreign exchange rates will alter the price of imported goods, business earnings and thousands of investments and savings held by pension funds and other trusts.
The investigation team found that corrupting the foreign exchange rate can destroy market confidence. The manipulation started in 2008 when relaxed controls on banks gave traders an opportunity to share confidential information with other banking institutions. This allowed banks to fix the exchange rates and thus increase their own profit.
The traders were colluding to play a certain role during the so-called "4 p.m. fix" - a one-minute snapshot of afternoon trading at the London Exchange that forms the basis of a global and much-used benchmark. The FCA said the banks failed to monitor the obvious risks its traders were engaging in and pointed out that individual employees and banks could face criminal charges.
Ross McEwan, the CEO at the Royal Bank of Scotland has expressed his anger at a very "small group of people," and several top-level traders at the bank have already been put on mandatory leave. The Serious Fraud Office is currently preparing information which will lead to more criminal prosecutions against the trading masterminds at the centre of the scandal.
More about Citibank, Bank fraud, Foreign exchange, rate fiddling, libor rate
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