Global Banks fined $3.4 billion

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By Reuters

Regulators fined five major banks $3.4 billion for failing to stop traders from trying to manipulate the foreign exchange market, the first settlement in a year-long global investigation.

UBS (UBSN.VX), HSBC (HSBA.L) and Citigroup (C.N), Royal Bank of Scotland (RBS.L) and JP Morgan (JPM.N) all face penalties resulting from the probe that has also put the largely unregulated $5 trillion-a-day market on a tighter leash. One regulator gave banks a 30 percent discount for settling early.

In the latest scandal to hit the financial services industry, dealers shared confidential information about client orders and coordinated trades to make money from a foreign exchange benchmark used by asset managers and corporate treasurers to value their holdings. Dozens of traders have been fired or suspended.

Dealers used code names to identify clients without naming them and created online chatrooms with pseudonyms such as “the players”, “the 3 musketeers” and “1 team, 1 dream” in which to swap information. Those not involved were belittled.

Switzerland’s UBS swallowed the biggest penalty paying $661 million to Britain’s Financial Services Authority (FCA) and the U.S. Commodity Futures Trading Commission (CFTC).

UBS was also ordered by Swiss regulator FINMA, which also said it had found serious misconduct in precious metals trading, to hand over 134 million Swiss francs after failing to investigate a 2010 whistleblower’s report.

The misconduct at the banks stretched back to the previous decade and up until October 2013, over a year after U.S. and British authorities started punishing banks for rigging the London interbank offered rate (Libor), an interest rate benchmark.

RBS, which is 80 percent owned by the British government, received client complaints about foreign exchange trading as far back as 2010. The bank said it regretted not responding more quickly to the complaints.

The other banks were similarly apologetic. Their shares were under pressure in European trading.

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