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 Regional Airport CEO Graham Ingham has ambitious plans for the airport. (Advocate file photo).
Red Deer Regional Airport revenues climb in 2020

Bringing in more business is the 2021 goal, says director

City council will have to wait longer to hear back from administration on possible alternative sites — if the homeless shelter is moved from Red Deer downtown. (Photo by LANA MICHELIN/Advocate staff).
Alternative sites for homeless shelter will be explored by the City of Red Deer

Council gave administration more time to return with a report

Quentin Lee Strawberry was found not guilty of second-degree murder in connection with stabbing death of Joseph Gallant in March 2019. (Photo from RCMP)
Updated: O’Chiese man found not guilty of 2019 stabbing death of Red Deer man

Quentin Strawberry found guilty of assaulting murdered man’s common-law partner

(Advocate file photo).
City of Red Deer property tax bills are in the mail

Red Deer 2021 tax notices are on their way. Red Deer property… Continue reading

Vancouver Canucks’ Nils Hoglander (36) scores on Winnipeg Jets goaltender Laurent Brossoit (30) during first-period NHL action in Winnipeg on Monday May 10, 2021. THE CANADIAN PRESS/Fred Greenslade
Hoglander scores twice as Vancouver Canucks dump slumping Winnipeg Jets 3-1

Hoglander scores twice as Vancouver Canucks dump slumping Winnipeg Jets 3-1

Edmonton Oilers' Dominik Kahun (21) celebrates with teammate Connor McDavid (97) after scoring the third goal against Montreal Canadiens goaltender Jake Allen (34) during second-period NHL hockey action in Montreal, Monday, May 10, 2021. THE CANADIAN PRESS/Ryan Remiorz
Canadiens clinch playoff spot with single point, fall to McDavid and Oilers in OT

Canadiens clinch playoff spot with single point, fall to McDavid and Oilers in OT

Rory McIlroy tees off on the fourth hole during the fourth round of the Wells Fargo Championship golf tournament at Quail Hollow on Sunday, May 9, 2021, in Charlotte, N.C. (AP Photo/Jacob Kupferman)
McIlroy ends 18 months without winning at Quail Hollow

McIlroy ends 18 months without winning at Quail Hollow

Canada , left to right, lead Briane Meilleur, third Val Sweeting, skip Kerri Einarson, and second Shannon Birchard discuss strategy against Sweden in a qualification game at the Women's World Curling Championship in Calgary, Alta., Saturday, May 8, 2021. Both of Canada's teams were shut out of the medals, marking the first time ever that Canada did not reach the podium at either the men's or women's worlds in the same season. THE CANADIAN PRESS/Jeff McIntosh
Bubble Wrap: Fresh questions for Canada after medal shutout at curling worlds

Bubble Wrap: Fresh questions for Canada after medal shutout at curling worlds

Edmonton Oilers' Connor McDavid (97) celebrates his 100th point this season with Leon Draisaitl (29) against the Vancouver Canucks during second period NHL action in Edmonton on Saturday, May 8, 2021.THE CANADIAN PRESS/Jason Franson
Oilers plan to keep playing McDavid, Draisaitl as NHL regular season winds down

Oilers plan to keep playing McDavid, Draisaitl as NHL regular season winds down

Canada's Tyler Ardron, right, tries to block the kick by Italy's Callum Braley during the Rugby World Cup Pool B match in Fukuoka, western Japan, Thursday, Sept. 26, 2019.  THE CANADIAN PRESS/Kyodo News via AP
Canadian men to face Wales and England in July rugby test matches

Canadian men to face Wales and England in July rugby test matches

John Velazquez, right, rides Medina Spirit ahead of Florent Geroux aboard Mandaloun to win the 147th running of the Kentucky Derby at Churchill Downs, Saturday, May 1, 2021, in Louisville, Ky. THE CANADIAN PRESS/AP/Darron Cummings
Casse believes colleague Baffert deserves “due process” folowing positive test

Casse believes colleague Baffert deserves “due process” folowing positive test

Canada forward Liam Millar (23) moves the ball past Bermuda defender Eusebio Blankendal (2) during the second half of a World Cup 2022 Group B qualifying soccer match Thursday, March 25, 2021, in Orlando, Fla. THE CANADIAN PRESS/AP-John Raoux
Canadian men to play next two World Cup qualifying matches in the U.S.

Canadian men to play next two World Cup qualifying matches in the U.S.

Most Read