Picture: BLOOMBERG/GABBY JONES
Picture: BLOOMBERG/GABBY JONES

Brussels  — Citigroup, Royal Bank of Scotland (RBS), and JPMorgan Chase are among five banks that have agreed to pay the EU fines totaling $1.2bn for colluding on forex trading strategies.

Citigroup was hit hardest with a €310.8m penalty, followed by fines of €249.2m and €228.8 for RBS and JPMorgan, respectively, the European Commission said on Thursday. Barclays  was fined €210.3m and Mitsubishi UFJ Financial Group (MUFG) must pay nearly €70m as part of the settlement with the EU’s antitrust regulator.

Traders ran two cartels on online chatrooms, swapping sensitive information and trading plans that allowed them to make informed decisions to buy or sell currencies, the regulator said. Many of them knew each other, calling one chatroom on the Bloomberg terminal the“Essex Express n’ the Jimmy” because all of the traders but one met on a commuter train from Essex to London. Other names for rooms were the “Three Way Banana Split” and “Semi-Grumpy Old Men”.

“Forex spot trading activities are one of the largest markets in the world, worth billions of euros every day,” EU competition commissioner Margrethe Vestager said. “These cartel decisions send a clear message that the commission will not tolerate collusive behaviour in any sector of the financial markets.”

While relatively large, the cartel fines are lower than a €1.3bn penalty for banks for rigging Euribor rates and below a record €3.8bn penalty for collusion between truck makers.

UBS Group escaped a fine because it was the first to tell regulators about the collusion. The five other banks won reduced penalties by striking a settlement with the commission that does not allow them to challenge the EU’s findings.

Credit Suisse Group was separately charged by the EU over forex collusion in 2018. That case is part of another EU probe into possible collusion that may have taken place in another chatroom.

Traders’ manipulation of benchmark forex rates was exposed in 2013, triggering regulatory probes in the US, the UK and Switzerland.

The Swiss bank “did not participate in any of the two infringements on which we took a decision today”, commission spokesperson Ricardo Cardoso said in Brussels on Thursday. “The case concerning Credit Suisse is following an ordinary procedure” rather than a settlement “and this relates to an alleged infringement which may have taken place in another chatroom”.

Zurich-based Credit Suisse said it “does not believe that its employees engaged in any conduct in the forex markets that violated” EU antitrust rules. The bank said it continues “to co-operate fully” with the commission “but intends to vigorously contest the substance of the allegations”.

Exposed in 2013

Traders’ manipulation of benchmark forex rates was exposed in 2013 Bloomberg articles, triggering regulatory probes in the US, the UK and Switzerland. More than a dozen financial institutions have paid about $11.8bn in fines and penalties globally, with another $2.3bn spent to compensate customers and investors.

Former US attorney-general Loretta Lynch, in 2015, said the banks engaged in a “brazen display of collusion” to game markets.

“Today’s fine is a further reminder of how badly the bank lost its way in the past and we absolutely condemn the behavior of those responsible,” RBS said in an e-mailed statement. “This kind of behaviour has no place at the bank we are today; our culture and controls have changed fundamentally during the past 10 years.”

JPMorgan said the bank is “pleased to resolve this historical matter, which relates to the conduct of one former employee” and has now “made significant control improvements”.

MUFG is “committed to ensuring integrity and compliance with the regulatory authorities in every jurisdiction in which we operate, and have taken a number of measures to prevent this occurring again”, the bank said in a statement. Citigroup and Barclays declined to comment.

The fines for Barclays and RBS are covered by the two British banks’ existing provisions and in line with expectations, according to Edward Firth, an analyst with Keefe, Bruyette & Woods in London.

The effects of the EU decision on banks will be “relatively mild, because the fines aren’t huge”, said Aitor Ortiz, an analyst at Bloomberg Intelligence. Referring to the third probe involving Credit Suisse, he said “we may still have to wait another year” to see the decision, because the bank has refused to join a settlement that would grant lower fines.

Traders exchanged information about outstanding customers’ orders, bid-ask spreads, their open-risk positions and details of current or planned trading activities. They would sometimes agree to “stand down” or stop a trading activity to avoid interfering with another trader in the group. They traded 11 currencies, including the euro, the dollar, the pound and the yen.

While the US has won guilty pleas from JPMorgan, Citigroup, RBS and Barclays, three British traders in a group known as “The Cartel” were acquitted by a US federal court in 2018 of using a chatroom to co-ordinate trades and manipulate prices on the spot exchange rate for euros and dollars.

The EU is continuing to investigate banks for possible EU antitrust violations.

Deutsche Bank, Credit Suisse and Crédit Agricole are targeted by an EU probe into a suspected cartel for trading of dollar supra-sovereign, sovereign and agency bonds via online chatrooms between 2009 and 2015.

Eight banks are the focus of yet another EU probe looking at the trading of eurozone sovereign bonds from 2007 to 2012. UniCredit said it faces a possible fine from the eurozone probe. RBS is also one of the banks being probed, a person said in February.

The EU regulator is also looking at “potential co-ordination in options trading” in the forex market, HSBC Holdings said in its annual report in February. HSBC received questions from regulators in October and the investigation is at an early stage, it said.

With Donal Griffin, Patrick Winters and Viren Vaghela.

Bloomberg