Washington : Four big banks will pay USD 2.5 billion in fines and plead guilty to criminally manipulating global currency market, way back in 2007.
JP Morgan Chase, Citigroup, Barclays and The Royal Bank of Scotland conspired with one another to fix rates on US dollars and Euros traded in the huge global market for currencies, according to a settlement announced Wednesday between the banks and U.S. Justice Department.
Currency traders allegedly shared customer orders through chat rooms and used that information to profit ahead of their clients. The criminal conduct took place between December 2007 and January 2013, according to the agreement.
Another bank, UBS, has agreed to plead guilty to manipulating key interest rates and will pay a separate $203 million criminal penalty.
Big banks have been fined billions of dollars earlier for their role in the housing bubble and subsequent financial crisis. But even so, the latest penalties are big. Unlike the stock and bond markets, currencies trade nearly 24 hours a day, seven days a week. The market pauses two times a day, a moment known as “the fix.” Traders allegedly shared client orders with rivals ahead of the “fix”, pumping up currency rates to make profits.
Global companies, which do business in multiple currencies, rely on their banks to give them the closest thing to an official exchange rate each day. Banks are supposed to be looking out for their clients instead of using their clients’ needs to profit ahead of them.
It is rare to see a bank plead guilty to any wrongdoing. Even in the aftermath of the financial crisis, most reached what were known as “non-prosecution agreements” or “deferred prosecution agreements” with regulators, agreeing to pay billions in fines but did not admit any guilt. If any guilt was found, it was usually one of the bank’s subsidiaries or divisions, not the bank holding company itself.
One of the most notable banks to plead guilty to any criminal wrongdoing was investment bank Drexel Burnham Lambert, which pleaded guilty to fraud in the 1980s following the implosion of the junk bond bubble.
