The banks, which include Citibank, HSBC, JP Morgan, the Royal Bank of Scotland and UBS, have been fined a total of £1.1bn ($1.7bn/€1.4bn) by the FCA and an additional £880m ($1.4bn/€1.1bn) by the US regulator, Commodity Futures Trading Commission (CFTC) for sharing confidential client information, and for manipulating currency rates in collusion with other firms. Barclays is also under investigation for its FX trading business.
Between January 2008 and October 2013, the FCA said the banks put their interests above their clients, with “ineffective controls” being in place to prevent risks surrounding client confidentiality, conflicts of interest and trading conduct, putting both clients and the market at a disadvantage.
The authority said the failings “allowed traders at those banks to behave unacceptably” and have “undermined confidence in the UK financial system and put its integrity at risk”.
Root causes
A remediation programme has also been launched by the FCA in an attempt to reform the industry by ensuring firms address the root causes of the failings and drive up standards across the market.
Other regulators in the UK, Europe and the US have been working closely with the UK finance authority to address the banks’ misconduct, with the US regulator, CFTC, and the Swiss regulator, FINMA, also slapping hefty fines on the banks.
“Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right,” said Martin Wheatley, chief executive of the FCA. “They must make sure their traders do not game the system to boost profits or leave the ethics of their conduct to compliance to worry about.”
This announcement follows BNP Paribas recieving a record fine in the US of $8.97bn (£5.2bn, €6.5bn) in September, with another 63 banks from around the world being threatened with heavy fines after they manipulated currency markets.
"Cleaning up the banks"
Partner at Kinetic Partners, Monique Melis, said this incident highlights the “sophistication” of the regulators as they implement better technology and deploy “higher caliber experts” to investigate complex areas.
“This case is the most significant collaboration between the regulators and follows a long line of market conduct scandals,” she said.
“There has been a lot of talk about ‘cleaning up the banks’, specifically their culture and conduct. However, unless this culture change comes from the top down, a new crisis will always be just around the corner.”
