Banks Fined For Exchange Rate Tampering
European stock indices dropped on Wednesday as regulators fined several major lenders over a foreign exchange scandal.
Thursday, November 13, 2014 - 00:00
Officials from the US, Switzerland and Great Britain fined HSBC Holdings Plc, Royal Bank of Scotland and UBS AG as settlement for a probe into foreign exchange manipulation. Barclays Plc would not reach an agreement and slid 2%.
The Stoxx Europe 600 dropped 0.9%, France’s CAC 40 declined 1.3%, Germany’s DAX 30 slipped 1.5% and Italy’s FTSE MIB fell 2.2%.
“There are a lot of unknowns for banks,” Dirk Thiels, head of investment management at KBC Asset Management NV, told Bloomberg. “Further litigation, provisions and regulation will surface in the next months or years and that will really push down profitability for the banking sector.”
Widespread manipulation occurred for years
According to the Wall Street Journal, five banks paid $3.3 billion USD in fines for their transgressions. The banks are alleged to have worked in conjunction to control the broad foreign exchange market as an effort to increase their profits. Some employees revealed the tampering years ago, but the banks continued their manipulation until 2013 when the first punishment finally took place.
Regulators said the banks teamed up to alter a currencies benchmark used to set exchange rates across the industry. The lenders also made efforts to initiate stop orders with some clients as a means of boosting their own profits. Finally, the five banks allowed traders to share confidential information about their clients with one another through electronic chat rooms.
The lenders did not argue the allegations. Some indicated they were unaware of the misbehavior and swore to track down the employees guilty of fraud. RBS said it is now “reviewing the conduct of over 50 current and former members of trading staff around the world as well as dozens of supervisors and senior management.”
These are not isolated allegations. Lenders have accumulated tens of billions of dollars in fines over the last few years as the result of interest rate manipulation, sanctions infringement and illegally selling a number of financial products.
Nadex offers regulated trading
Through Nadex, investors can trade securely on a variety of markets across the world. Nadex is based in the US, subject to regulatory oversight by the CFTC, and holds member funds in a segregated bank account in accordance with CFTC regulations.
Designed primarily for retail traders, Nadex provides you with direct access to contracts based on a range of global markets – without the need of a broker to act as a middleman.
This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.