Group of banks fined over $5 billion, will plead guilty to rigging global currency markets

Four global banks agreed Wednesday to pay more than $5 billion in penalties and plead guilty to rigging the world’s currency market, the first time in more than two decades that major players in the financial industry have admitted to criminal wrongdoing on such a scale.

WASHINGTON — Four global banks agreed Wednesday to pay more than $5 billion in penalties and plead guilty to rigging the world’s currency market, the first time in more than two decades that major players in the financial industry have admitted to criminal wrongdoing on such a scale.

Traders at JPMorgan Chase, Citigroup, Barclays and the Royal Bank of Scotland conspired among themselves to fix exchange rates on U.S. dollars and euros, according to a resolution announced by the banks and the Justice Department. The currency traders, who called themselves “The Cartel,” allegedly shared customer orders through chat rooms and used that information to profit at their clients’ expense.

The resolution is complex and involves multiple regulators in the U.S. and overseas.

The four banks will pay a combined $2.5 billion in criminal penalties to the Justice Department for criminal manipulation of currency rates between 2007 and 2013. The Federal Reserve is slapping them with an additional $1.6 billion in fines, as the banks’ chief regulator. Finally, Britain’s Barclays is paying an additional $1.3 billion to British and U.S. regulators for its role in the scheme.

Another bank, Switzerland’s UBS, has agreed to plead guilty to manipulating key interest rates and will pay a separate criminal penalty of $203 million.

Big banks have already been fined billions for their role in the housing bubble and subsequent financial crisis. Even so, the latest penalties are big. Including an agreement announced last year, the group of banks will pay nearly $9 billion in fines for manipulating the $5.3 trillion currency market.

Still, the penalties pale in comparison to the banks’ profits. JPMorgan Chase had $4.1 billion in revenue from its fixed income and currencies business in the first quarter of this year alone, while Citi had $3.48 billion.

It is rare to see a bank plead guilty to wrongdoing. Even in the aftermath of the financial crisis, most financial companies reached “non-prosecution agreements” or “deferred prosecution agreements” with regulators, agreeing to pay billions in fines but not admitting any guilt. If any guilt was acknowledged, it was usually by one of the bank’s subsidiaries or divisions — not the overall company.

One of the most notable financial institutions to plead guilty to criminal wrongdoing was investment bank Drexel Burnham Lambert. It pleaded guilty to fraud in the 1980s after the junk bond bubble burst.

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 in the cartel allegedly shared client orders with rivals ahead of the “fix” and pumped 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. The banks are supposed to be looking out for them instead of conspiring to get even bigger profits by using customers’ orders against them. Travelers who regularly exchange currencies also need to get a fair price for their euros or dollars.

The number of traders who took part in the currency fixing was small. JPMorgan said the one trader involved has been fired. Citi said it fired nine employees.

The agreement with the Justice Department is subject to court approval. If it is approved, all five banks will be put on three years of corporate probation. They will also help prosecutors investigate individuals who took part in the rigging.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer city council gave initial approval for more mixed-use developments in Riverside Light Industrial Park. (File photo by Advocate staff)
More industrial landowners in Red Deer are pursuing mixed-use zoning

A third of Riverside Light could become a commercial/industrial district

Central Alberta man facing second-degree murder in connection with December death.
Advocate file photo
Central Alberta man facing second-degree murder in connection with December death

Maskwacis RCMP said female found dead in Ermineskin Cree Nation residence last December

Red Deer College has been working towards obtaining university status for a couple of years. (File photo by Advocate staff)
Red Deer College’s university status back in question

Red Deer College should be worried that its university dreams could be… Continue reading

The Mountain Cree Traditional Band headquarters in Mirror, Alta. has been the target of theft and vandalism. (Photo submitted)
Vandals strike: Artifacts worth $1M gone from central Alberta museum

AWNTB says not enough been done to deter crime in Mirror, Alta.

Justin Kripps of Summerland and his team have competed in Olympic action and World Cup competitions in bobsleigh. (Jason Ransom-Canadian Olympic Comittee).
QUIZ: Are you ready for some winter sports?

It’s cold outside, but there are plenty of recreation opportunities in the winter months

Montreal Canadiens down Edmonton Oilers 3-1, sweep series

Montreal Canadiens down Edmonton Oilers 3-1, sweep series

Toronto Raptors forward Pascal Siakam (43) loses the basketball as he tries to drive around Dallas Mavericks center Willie Cauley-Stein (33) during the second half of an NBA basketball game Monday, Jan. 18, 2021, in Tampa, Fla. THE CANADIAN PRESS/AP-Chris O'Meara
Lowry leads the way as Raptors down the Mavericks for their third straight win

Lowry leads the way as Raptors down the Mavericks for their third straight win

Johnny Gaudreau’s goal and assist paces Flames to 5-2 victory over Canucks

Johnny Gaudreau’s goal and assist paces Flames to 5-2 victory over Canucks

Conservative Leader Erin O'Toole holds a press conference on Parliament Hill, in Ottawa, on Dec. 10, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Tory MP Sloan accuses party of hypocrisy over efforts to have him expelled

Tory MP Sloan accuses party of hypocrisy over efforts to have him expelled

FILE - In this Tuesday, Jan. 15, 2019 file photo Britain's Andy Murray reacts during a press conference following his first round loss to Spain's Roberto Bautista Agut at the Australian Open tennis championships in Melbourne, Australia. Former world number one Murray's participation at the upcoming Australian Open is in doubt after the Briton tested positive for COVID-19. (AP Photo/Kin Cheung, File)
Australian Open arrivals hit by 3 COVID-19 positive tests

Australian Open arrivals hit by 3 COVID-19 positive tests

Toronto Maple Leafs right wing Mitchell Marner (16) scores on an empty net and takes a hit from Winnipeg Jets defenceman Neal Pionk (4) during third period of action in Toronto on Monday, January 18, 2021. THE CANADIAN PRESS/Nathan Denette
Toronto Maple Leafs ride dominant second period to down Winnipeg Jets 3-1

Toronto Maple Leafs ride dominant second period to down Winnipeg Jets 3-1

Roman Sadovsky wins the Challenge, his only event of the figure skating season

Roman Sadovsky wins the Challenge, his only event of the figure skating season

Belarusian President Alexander Lukashenko, left, speaks with International Ice Hockey Federation President Rene Fasel during their meeting in Minsk, Belarus, Monday, Jan. 11, 2021. (Nikolai Petrov/BelTA Pool Photo via AP)
IIHF pulls hockey worlds from Belarus, seeks new host

IIHF pulls hockey worlds from Belarus, seeks new host

Most Read