Washington, D.C. – Aitan Goelman, the CFTC’s Director of Enforcement, oversaw the settlement of charges against five major banks – Citibank N.A., HSBC Bank plc, JPMorgan Chase Bank N.A., The Royal Bank of Scotland plc, and UBS AG – for their roles in attempting to manipulate global foreign exchange (FX) benchmark rates. The Commodity Futures Trading Commission issued five Orders on November 12, 2014, detailing the findings and resulting penalties.
The collective penalty levied against the banks totals over $1.4 billion in civil monetary penalties. Citibank and JPMorgan each face a $310 million fine, while RBS and UBS will each pay $290 million. HSBC will pay $275 million. The charges stem from conduct occurring between 2009 and 2012, where traders allegedly colluded to influence rates for their own benefit.
The CFTC’s investigation focused on manipulation of the World Markets/Reuters Closing Spot Rates (WM/R Rates), a widely used benchmark for currency valuation. These rates are crucial for pricing a variety of financial instruments, including swaps, futures, and options. The integrity of these benchmarks is vital to the global financial market.
According to the Orders, FX traders from the involved banks coordinated their efforts through private chat rooms. These online forums were used to share confidential customer information, alter trading positions to benefit the group, and develop strategies to manipulate the 4 p.m. WM/R fix. Some of these chat rooms were exclusive, requiring invitations for access.
“The setting of a benchmark rate is not simply another opportunity for banks to earn a profit,” stated Goelman. “Countless individuals and companies around the world rely on these rates to settle financial contracts, and this reliance is premised on faith in the fundamental integrity of these benchmarks. The market only works if people have confidence that the process of setting these benchmarks is fair, not corrupted by manipulation by some of the biggest banks in the world.”
In addition to the financial penalties, the banks are required to cease and desist from further violations and implement stricter internal controls. These controls aim to improve supervision of FX traders and ensure the integrity of communications surrounding benchmark rate fixing.
Source: CFTC.gov
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