Bloomberg News

U.K. Talks on Currency-Rigging Settlement Accelerate

July 23, 2014

Bank FX-Settlement Talks With U.K. Regulator Said to Accelerate

A customer, left, at a foreign exchange outlet in Bangalore. Photographer: Manjunath Kiran/AFP via Getty Images

Talks to reach the first settlement in the currency-rigging probe are accelerating, with Britain’s markets regulator preparing to reach a deal with a group of banks this year, people with knowledge of the situation said.

The Financial Conduct Authority is in negotiations with banks including Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. (JPM:US) and UBS AG, said the people, who asked not to be identified because the discussions are private. Royal Bank of Scotland Group Plc and HSBC Holdings Plc may also be part of the group settlement, one of the people said.

The FCA is trying to fast-track the process and may levy any fines in the coming months, three of the people said. The watchdog is seeking to keep the scope of the deal narrow to speed up the settlement, two of the people said. Agreements haven’t been reached yet and could still stretch into next year, the people added. Representatives of the banks and FCA in London declined to comment on the talks.

Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies. More than 25 traders have been fired, suspended or put on leave after the allegations emerged last year.

All six banks have said they’re cooperating with the investigations.

Wheatley Comments

The settlement would be more imminent than the FCA has previously indicated possible. Last week, Chief Executive Martin Wheatley reiterated his comments to lawmakers in February that the probe is unlikely to be concluded before 2015.

U.K. prosecutors at the Serious Fraud Office opened a criminal investigation into conduct in currency markets this week. Director David Green said charges could come as soon as next year and that they’re looking into just a few individuals and institutions, Reuters reported yesterday. A spokesman for the SFO confirmed the comments.

The U.S. Department of Justice is also conducting a criminal probe, as well as an antitrust investigation, into the matter. The department is preparing to impose its first fines and bring charges as soon as this year, a person with knowledge of the situation said last month.

Market Shift

Citigroup has the biggest share of the global foreign-exchange market with 16 percent, followed by Deutsche Bank AG, Barclays and UBS. HSBC accounts for 7.1 percent of the market, followed by JPMorgan. RBS ranks eighth on Euromoney Institutional Investor Plc’s annual survey.

The widening probe has hastened a shift in the industry, with banks adopting tighter controls on how their traders communicate with counterparts at other firms, and increasing their use of electronic platforms. While people have been replaced by machines in other markets such as equities, most currency transactions take place off of exchanges, forcing clients to rely on their dealers for market and order-book information.

Senior currency dealers have been stepping down, or getting pushed out, in greater numbers amid the turmoil prompted by the manipulation probes. All six of the banks in settlement talks with the FCA have fired, suspended or put on leave members of their foreign-exchange teams.

The Bank of England has also become embroiled in the scandal after it emerged bank officials allegedly condoned practices that could have resulted in market-rigging. The central bank has commissioned an independent investigation into the allegations and suspended an employee.

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Suzi Ring in London at sring5@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net Heather Smith


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