Eight of the world’s largest banks are set to discuss financial settlements with the European Commission, drawing a line under a four-year probe into allegations they formed a cartel to rig the $5.3tn global foreign exchange market.
UBS, Royal Bank of Scotland, JPMorgan Chase, Citigroup, Barclays, HSBC and two other banks are gearing up to negotiate settlements likely to cost billions of euros combined, according to several people close to the probe.
The cartel case — one of the biggest that Brussels has handled — poses a challenge to investigators because of the complexity of the alleged misconduct across a large number of currencies. It is one of the last in a flurry of investigations into the manipulation of financial benchmarks.
Fines are expected to exceed the nearly €2bn imposed on banks during the EU’s earlier interest rate-rigging probes, some of the people said.
The EU forex probe follows investigations by American, British and Swiss officials, which have fined global banks more than $10bn for such offences. In total, financial institutions have paid more than $320bn in penalties since 2008, according to Boston Consulting Group.
The banks involved are prepared to negotiate settlements with EU officials in the next few months, according to the people close to the case. Banks individually met the EU’s cartel-busters at the start of the year to view the evidence as the first step in the process, they said.
It was not clear when the banks and EU officials would next meet, but deals were likely to be announced next year. The commission and the banks declined to comment.
“Progress is being made . . . but nothing is imminent,” the people briefed on the matter said.
Cartel members can avoid a fine if they are the first to report the cartel to EU officials. The whistleblowers in the EU’s interest rate decisions avoided substantial costs: Barclays did not have to pay a €690m fine in the investigation into rigging the euro interest rate, while UBS dodged a €2.5bn penalty on the yen interest rate cartel.
By choosing to settle, companies reduce their fines by 10 per cent and avoid a detailed statement of case facts that can provide ammunition for claimants seeking damages, should the charges against them lead to a formal decision.
US regulators levied $5.6bn in forex fines in 2015 against six banks — Barclays, Citi, JPMorgan, RBS, Bank of America and UBS — for manipulating foreign exchange markets from December 2007 to January 2013.
Beyond fines, individual bankers have also been held accountable. Mark Johnson, HSBC’s former head of global cash foreign-exchange trading, was convicted of defrauding a client in the US last month. Stuart Scott, his former colleague at HSBC, is set to appeal against extradition from the UK to the US to face similar charges.
In July, three former currency traders accused of being part of a group dubbed “the Cartel” pleaded not guilty in their first appearances before a US judge to face charges in connection with a sprawling probe into the rigging of forex benchmarks.
In January, former Barclays and BNP Paribas trader Jason Katz pleaded guilty to participating in a price-fixing conspiracy in the forex markets. The US Federal Reserve barred him permanently from working in the banking industry.
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