Citi hit hardest as EU fines banks $1.2 billion over foreign exchange

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Citigroup, Royal Bank of Scotland Group and JPMorgan Chase are among five banks that agreed to pay European Union fines totaling 1.07 billion euros ($1.2 billion) for colluding on foreign-exchange trading strategies.

Citigroup was hit hardest with a 310.8 million-euro ($348 million) penalty, followed by fines of 249.2 million euros ($279 million) and 228.8 million euros ($256 million) for RBS and JPMorgan, the European Commission said in a statement on Thursday. Barclays Plc was fined 210.3 million euros and Mitsubishi UFJ Financial Group must pay nearly 70 million euros as part of the settlement with the EU’s antitrust regulator.

Traders ran two cartels on online chatrooms, swapping sensitive information and trading plans that allowed them make informed decisions to buy or sell currencies, the regulator said. Many of them knew each other, calling one chatroom on the Bloomberg terminal the "Essex Express n’ the Jimmy" because all of the traders but one met on a commuter train from Essex to London. Other names for rooms were the "Three Way Banana Split" and "Semi Grumpy Old Men."

"Foreign exchange spot trading activities are one of the largest markets in the world, worth billions of euros every day," EU Competition Commissioner Margrethe Vestager said. "These cartel decisions send a clear message that the commission will not tolerate collusive behavior in any sector of the financial markets."

While relatively large, the cartel fines are lower than a 1.3 billion-euro penalty for banks for rigging Euribor rates and below a record 3.8 billion-euro penalty for collusion between truckmakers.

UBS Group AG escaped a fine because it was the first to tell regulators about the collusion. The five other banks won reduced penalties by striking a settlement with the commission that won’t allow them to challenge the EU’s findings. Credit Suisse Group AG was separately charged by the EU over FX collusion last year. That case involves another online chatroom and banks may be fined at a later date.

Traders’ manipulation of benchmark foreign-exchange rates was exposed in 2013 Bloomberg articles, triggering regulatory probes in the U.S., the U.K. and Switzerland. More than a dozen financial institutions have paid about $11.8 billion in fines and penalties globally, with another $2.3 billion spent to compensate customers and investors. Former U.S. attorney general Loretta Lynch in 2015 said the banks engaged in a “brazen display of collusion” to game markets.

“Today’s fine is a further reminder of how badly the bank lost its way in the past and we absolutely condemn the behavior of those responsible,” RBS said in an emailed statement. “This kind of behavior has no place at the bank we are today; our culture and controls have changed fundamentally during the past ten years.”

JPMorgan said the bank is “pleased to resolve this historical matter, which relates to the conduct of one former employee” and has now “made significant control improvements.”

MUFG is “committed to ensuring integrity and compliance with the regulatory authorities in every jurisdiction in which we operate, and have taken a number of measures to prevent this occurring again,” the bank said in a statement. Citigroup and Barclays declined to comment.

The fines for Barclays and RBS are covered by the two British banks’ existing provisions and in line with expectations, according to Edward Firth, an analyst with Keefe, Bruyette & Woods in London.

Traders exchanged information about outstanding customers’ orders, bid-ask spreads, their open-risk positions and details of current or planned trading activities. They would sometimes agree to "stand down" or stop a trading activity to avoid interfering with another trader in the group. They traded 11 currencies, including the euro, the U.S. dollar, the British pound and the Japanese yen.

While the U.S. has won guilty pleas from JPMorgan, Citigroup, RBS and Barclays, three British traders in a group known as “The Cartel” were acquitted by a U.S. federal court last year of using a chatroom to coordinate trades and manipulate prices on the spot exchange rate for euros and U.S. dollars.

The EU is continuing to investigate banks for possible EU antitrust violations.

Deutsche Bank AG, Credit Suisse and Credit Agricole SA are targeted by an EU probe into a suspected cartel for trading of U.S. dollar supra-sovereign, sovereign and agency bonds via online chatrooms between 2009 and 2015.

Eight banks are the focus of yet another EU probe looking at the trading of eurozone sovereign bonds from 2007 to 2012. UniCredit SpA said it faces a possible fine from the eurozone probe. RBS is also one of the banks being probed, a person said in February.

The EU regulator is also looking at "potential coordination in options trading" in the FX market, HSBC Holdings Plc said in its annual report in February. HSBC received questions from regulators in October and the investigation is at an early stage, it said.

Bloomberg News
Financial crimes Citigroup JPMorgan Chase Barclays