A new scandal involving leading financial institutions in Europe and the US has been added to the list of previous cases.
Barclays, RBS, JPMorgan, Bank of America, UBS and Citigroup are accused of manipulating foreign exchange market which the FBI says involved criminality “on a massive scale”.
Four banks have agreed to plead guilty to conspiring to fix prices and rig bids in the $5.3-trillion a day forex market and pay around $6 billion in fines.
They used secret language, private chat rooms, and other deceptive means to manipulate the US dollar and the euro.
US Assistant Attorney General Bill Baer says “the members of this cartel chatroom conspired to gain unlawful profit by manipulating those exchange rates”.
“The banks pleading guilty today are not just ordinary market participants. They are market makers. They represent 25% or more of dollar-euro exchange rate transactions each year. As such, they were uniquely positioned to manipulate this market,” he said.
The amount imposed on the six banks was the biggest-ever combined bank settlement in history, and along with the separate fines and settlements also announced on the day, has brought the overall bill for the forex scandal in recent years to over $10 billion.
Forex manipulation and scandals have been ongoing for many years, with regulators not taking stringent measures beyond fines.
Stephen Davie, director of ADS securities Abu Dhabi, says “the important fact is that the regulators have now taken action”.
“The size of the fine does not help them. It puts more pressure on the banks when most traders are just looking for good liquidity and for the banks to respect the regulation which is in place,” he told the Euronews.
According to Davie, the forex market is so large and so important that it will not be affected by what has happened in the past. Over $5.3 trillion are traded each day, a flow which is vital for the global financial industry.
“The main damage will be to the reputation of the banks and the trust that investors have for the banks,” he said.
As the financial control authorities issued the hefty fines, experts expressed the view that it may not be the last scandal in the sector.
Trust is now at a tipping point as investors consider changing their investment to other trading destinations. The news has left people questioning how banks are going to make sure this type of scandal doesn’t happen again.
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