Banks plead guilty: More details
Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global probe into the $5 trillion-a-day market.
Citigroup Inc, JPMorgan Chase & Co, Barclays Plc, UBS AG and Royal Bank of Scotland Plc were accused by U.S. and UK officials of brazenly cheating clients to boost their own profits using invitation-only chat rooms and coded language to coordinate their trades.
All but UBS pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the FX spot market. UBS pleaded guilty to a different charge. Bank of America Corp was fined but avoided a guilty plea over the actions of its traders in chatrooms.
"The penalty all these banks will now pay is fitting, considering the long-running and egregious nature of their anticompetitive conduct," said U.S. Attorney General Loretta Lynch at a news conference in Washington.
The misconduct occurred until 2013, after regulators started punishing banks for rigging the London interbank offered rate (Libor), a global benchmark, and banks had pledged to overhaul their corporate culture and bolster compliance.
In total, authorities in the United States and Europe have fined seven banks over $10 billion for failing to stop traders from trying to manipulate foreign exchange rates, which are used daily by millions of people from trillion-dollar investment houses to tourists buying foreign currencies on vacation.
The investigations are far from over. Prosecutors could bring cases against individuals, using the banks' cooperation pledged as part of their agreements. Probes by federal and state authorities are ongoing over how banks used electronic forex trading to favor their own interests at the expense of clients.
The settlements on Wednesday stood out in part because the U.S. Department of Justice forced Citigroup's main banking unit Citicorp, and the parents of JPMorgan, Barclays and Royal Bank of Scotland to plead guilty to U.S. criminal charges.
It was the first time in decades that the parent or main banking unit of a major American financial institution pleaded guilty to criminal charges.
Until recently, U.S. authorities rarely sought criminal convictions against the parents of global financial institutions, instead settling with smaller foreign subsidiaries. That made it easier for the government and the banks to control any fallout on the financial system and bank customers.
Banks involved in the plea deals have been negotiating regulatory exemptions to avoid serious business disruptions that could be triggered by the pleas.
The U.S. Securities and Exchange Commission has granted waivers to JPMorgan and the other banks that pleaded guilty, allowing them to continue their usual securities business.
With prosecutors and the banks working out ways for the institutions to keep doing business, analysts worried that convictions would become more routine and costly for banks.
"The broader problem is that this now sets the stage for the Justice Department to try to criminally prosecute banks for all sorts of transgressions," said Jaret Seiberg, an analyst at Guggenheim Securities.
Lawyers said the guilty pleas would make it easier for pension funds and investment managers who have regular currency dealings with banks to sue them for losses on those trades.
"There is already a lot of work going on behind the scenes assessing how claims could be brought forward and those potential claimants will be looking to today's announcement for evidence to support their analysis," said Simon Hart, banking litigation partner at London law firm RPC.