Free money: Record fines for rogue bankers who rigged the market

The five world's biggest banks are to pay fines totalling £2 billion after regulators lifted the lid on the latest scandal to rock the industry.

Five banks are to pay fines of more than £2 billion after the latest scandal to rock the industry saw traders referred to as the “Three Musketeers” and the “A-team” attempt to rig the £3 trillion-a-day foreign exchange market.

Royal Bank of Scotland, HSBC, Citibank, JP Morgan Chase and UBS were handed penalties totalling a record £1.1 billion by Britain’s Financial Conduct Authority (FCA) and 1.5 billion US dollars (£927 million) by US authorities.

Investigators found traders from different firms formed groups under various code names in order to help them manipulate currency exchange rates that would profit the banks at the expense of clients.

Transcripts of conversations held in chat rooms and disclosed by the FCA today reveal how the traders referred to “free money” and not wanting other “numpty’s” in the market to know about information within their group.

The FCA said that the failure by the banks to control business practices undermined confidence in UK financial markets and put its integrity at risk, with 40% of forex trading taking place in London. However, the regulator said there was no suggestion that the practices had an impact on consumers.

As the findings cover a period between 2008 and October 2013, banks failed to act despite the previous scandal over the manipulation of the benchmark Libor interbank lending rate which resulted in billions of pounds of fines.

The Serious Fraud Office has launched a criminal investigation into the manipulation, while Royal Bank of Scotland said it has placed six individuals into a disciplinary process.

The Bank of England was dragged into the scandal amid claims officials knew about the practices. A review today found while none were aware of “improper conduct”, one member of staff failed to raise the alarm about traders sharing information.

It said that its chief foreign exchange dealer, who was suspended in March, had been fired yesterday for “a failure to adhere to internal policies” but said it was “not at all related” to the forex probe.

FCA chief executive Martin Wheatley said: “Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right. They must make sure their traders do not game the system to boost profits.”

The fines from the UK regulator dwarf its previous total penalties of £532 million for the Libor scandal and also set new records for its fines for individual banks, with the previous highest being £160 million.

Royal Bank of Scotland, which is 80% owned by the taxpayer, was fined a total of £399 million including £217 million by the FCA and 290 million US dollars (£182 million) by the US Commodity Futures Trading Commission (CFTC).

RBS said it has placed six individuals into a disciplinary process, three of whom are currently suspended, pending further investigation. It said it would make a statement about the probe by the end of the year.

Chairman Sir Philip Hampton said: “The RBS board fully accepts the criticisms within today’s announcements and condemns the actions of those employees responsible for this misconduct.”

Chief executive Ross McEwan added: “To say that I am angry about the misconduct would be an understatement.

“We had people working at this bank who did not know the difference between right and wrong, or worse, didn’t care about the distinction.”

He said that those responsible would have bonuses clawed back or face disciplinary procedures. The bank said six were undergoing a disciplinary process, with three suspended. A statement about the probe will follow by the end of the year.

The bank, which has analysed millions of documents, said it was reviewing the conduct of more than 50 current and former members of trading staff around the world as well as dozens of supervisors and senior management.