According to Global law firm Hausfeld, which is co-lead counsel in the case against the banks in the US, European regulators are acting fast after leading banks pleaded guilty in the United States to colluding with respect to FX rates.
The firm has provided a detailed perspective on the outcomes of today’s issuing of very high penalties to financial institutions as further punitive measures against major banks for their part in FX rate manipulation,
The firm looks at the case of ‘Foreign Exchange Benchmark Rates Antitrust Litigation, 13cv7789 (S.D.N.Y.)’, within which it was announced that five defendants have agreed with the U.S. Department of Justice to plead guilty to violating U.S. law. In addition to the guilty pleas, the banks agreed to pay more than $2.7 billion to the Department of Justice to resolve their investigations.
The Federal Reserve imposed further fines of more than $1.6 billion on the same five banks and $205 million on Bank of America for =unsafe and unsound practices@. Barclays will also pay a $1.3 billion fine as part of settlements with the New York Department of Financial Services, the Commodity Futures Trading Commission and the Financial Conduct Authority.
American and European banks, namely X Citigroup, Barclays, JPMorgan, and RBS X pleaded guilty today to violating U.S. antitrust laws. UBS has been granted conditional immunity for its conduct with respect to the FX market, but pleaded guilty to wire fraud for its role in rigging interest rate benchmark Libor after its involvement in the FX scandal breached an earlier agreement with the U.S. Department of Justice.
UBS’ conditional immunity for FX misconduct was granted because it was the first bank to report the misconduct to the U.S. Department of Justice. These guilty pleas reflect widespread collusion in the FX market. This indicates that financial and nonͲfinancial corporates were likely denied competitive exchange rates because of the banks’ collusive practices and that the banks were able to generate illicit profits at their clients’ expense.
With today’s fines in excess of $5.8 billion, seven banks have paid upward $10 billion to resolve allegations of collusion in the FX market. In November 2014, the U.S. Commodity Futures Trading Commission, the U.S. Office of the Comptroller of the Currency, the U.K. Financial Conduct Authority, and the Swiss Financial Market Supervisory Authority (FINMA) levied $4.3 billion in fines on Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), HSBC Holdings plc (LON:HSBA), JPMorgan, Royal Bank of Scotland Group plc (LON:RBS), and UBS AG (SWX:UBSN).
Today, Barclays became the first bank fined in the UK since the first round of regulatory fines was issued in November 2014, agreeing to pay more than $3.1bn (£2bn) to UK and U.S. financial regulators. Citigroup, JPMorgan Chase and RBS have agreed to pay as much as $1bn each to the DoJ,which was not part of the earlier November fines. Finally, the U.S. Federal Reserve fined UBS $342m for its role in the FX scandal.
Subsidiaries of all four banks, as well as Barclays, have also pleaded guilty to U.S. criminal charges. Anthony Maton, managing partner at Hausfeld (London) said: “These guilty pleas announced today in the United States are only one side of this story. The illegal actions of the banks extended beyond the U.S. Regulators in London have already fined the Banks for some of this behaviour. For reference, see the FCA notices of November 2014 and today. European regulators are also investigating these practices.”
“There is no doubt that anyone who traded FX in or through the London market Ǧ and there is $5.3 trillion of business here every day Ǧ will have suffered significant loss as a result of the actions of the banks” stated Mr. Hausfeld.
Forty per cent of transactions in the FX market X which has a daily average turnover of $5.3 trillion takes place in London. European companies and investors which hedged their positions to protect themselves from unwanted movements in the FX markets through FX based derivatives, and repatriated global currency holdings through FX spot trading, are likely to have strong potential claims.
Regulators worldwide have found strong evidence showing that banks shared market sensitive information with each other through chat rooms Ͳincluding text messages and emailsͲand manipulated at least 21 major currencies.
The European Commission is close to ruling whether the banks were guilty of antiͲcompetitive conduct and any infringement would immediately reinforce the banks[ liability in Europe.
Michael D. Hausfeld, chairman of Hausfeld, said: “The banks pleaded guilty to colluding with their competitors to fix the foreign exchange rates at the expense of their customers in the world’s largest financial market. The rights of customers cannot be subordinated to the self-interest of trader profit. The duties of financial institutions to those who entrust them with their investments must be respected. Where there is a failure of this responsibility, it must be clear that there will be accountability”.
In recent months, Hausfeld LLP has announced 4 settlements in the US class action totaling more than $800 million with Bank of America, Citigroup, JPMorgan, and UBS. Hausfeld is advising a number of FX claimants in the UK and continental Europe of the prospects of their claim and whether they have a good opportunity of recovering money they lost as a result of the banks’ FX rates collusion. The firm has brought together highly experienced lawyers, economic and market experts to recover damages efficiently and a number of claims are expected in European courts in the next months.