British and American regulators fined five of the world’s biggest banks a combined $3.16 billion on Wednesday for conspiring to manipulate the foreign currency market, the latest scandal to hit an industry facing increased scrutiny and mounting legal costs for its past sins.
The fines, large by European standards and a record for the Financial Conduct Authority of Britain, come as regulators are increasingly targeting a business culture within the financial industry that they claim encouraged improper conduct by the sector’s employees. The banks, however, still face the prospect of criminal charges in the matter, which will drag out the inquiries.
On Wednesday, the Financial Conduct Authority of Britain said it had reached a so-called global settlement worth a combined £1.1 billion, or about $1.76 billion, with the Swiss bank UBS; the British lenders HSBC and the Royal Bank of Scotland; and the American banks JPMorgan Chase and Citigroup.
The British bank Barclays had been expected to join the settlement, but dropped out at the last minute. The authority said on Wednesday that it would continue its investigation into Barclays.
“After discussions with other regulators and authorities, we have concluded that it is in the interests of the company to seek a more general coordinated settlement,” Barclays said in a statement on Wednesday. “We will continue to engage with these authorities, including the FCA and CFTC, with the objective of bringing this to resolution in due course.”
The Commodity Futures Trading Commission in the US separately imposed $1.4 billion in penalties against Citigroup, JPMorgan, RBS, UBS and HSBC.
The fines, while adding up to large sums, are unlikely to seriously impinge on the banks’ balance sheets. Many of the banks had signalled in recent weeks that a settlement was coming, with several lenders setting aside money for fines and other charges or revising their third-quarter results in recent weeks to reflect the impact of a potential deal.
The Financial Conduct Authority accused the lenders of failing to have the proper controls in place to prevent misconduct in the trading of currencies of the Group of 10 nations, while the CFTC accused traders at the banks of trying to more broadly manipulate the foreign exchange benchmark rates.
“Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right,” Martin Wheatley, the FCA chief executive, said in a news release.
“They must make sure their traders do not game the system to boost profits or leave the ethics of their conduct to compliance to worry about. Senior management commitments to change need to become a reality in every area of their business.”