Banks fined over foreign exchange rigging; Greek default fears grow - as it happened
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Regulators announce penalties against Barclays, JP Morgan, Citigroup, Royal Bank of Scotland, UBS and Bank of America Merrill Lynch for manipulating the foreign exchange markets
That’s a surprisingly small increase. But one source has told Reuters that Greece hasn’t hit the €80bn limit yet; it now has a €3bn buffer to cope with capital withdrawals.
Tsipras and Merkel to discuss Greek crisis on Thursday night
Helena Smith
Greek Prime Minister Alexis Tsipras today. Photograph: Yannis Kolesidis/EPA
And finally, some important news from Greece as it strives to reach a deal with its creditors.
Speaking to the Guardian in Athens tonight, government spokesman Gavriel Sakellarides said the Greek prime minister Alexis Tsipras would be meeting Angela Merkel on Thursday night, after EU leaders had attended an official summit dinner in Riga, Latvia.
Sakellarides told us:
“We know that decisive decisions ultimately are taken at the level of finance ministers in the Euro Group but at this critical moment a meeting between Tsipras and Merkel can only be helpful.”
Talks would focus on the headway negotiators had made since the two leaders last met, said Sakellarides.
They will also cover the urgency of Greece’s liquidity problem, and issues such as VAT, pensions and labour deregulation which continue to be the major stumbling blocks between the two sides.
But Sakellarides, who is among Tsipras’ closest allies, denied that the leftist-led government now faced the dilemma of sticking to its “red lines” or seeing the county rejected from the euro zone.
“It is not a question of red lines or the eurozone. It boils down to what everybody has understood in the last five years which is that the regime of austerity has failed.
The persistence of the architects of this regime and their insistence of keeping the country on the same track, is simply irrational. We want to stop the vicious cycle of debt and recession. It’s not about stubbornness. It’s about preserving Greece and its people.”
And that’s probably all for tonight. Back tomorrow. Thanks for reading and commenting. GW
Announcing the fines Loretta Lynch, US attorney general, said the banks had exhibited “breathtaking flagrancy” setting up a group they called “the cartel” to manipulate a market valued at $5trn a day.
“The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct. It is commensurate with the pervasive harm done.
And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare,”
U.S. Attorney General Loretta Lynch announcing todays’s fines. Photograph: Chip Somodevilla/Getty Images
The new fines are a second wave of punishments for fixing forex markets. Six major banks were fined £2.6bn in November 2014. This takes the total penalties to £6.3bn.
Barclays, which was hit by the UK regulator’s biggest ever fine, will fire eight employees.
“The conduct of a small number of employees was unacceptable and we have taken appropriate disciplinary actions,” UBS Chief Executive Officer Sergio Ermotti and Chairman Axel Weber said in a statement.
JPMorgan said in a statement that the conduct underlying the antitrust charge against the bank is “principally attributable” to a single trader, who has since been dismissed.
“The conduct described in the government’s pleadings is a great disappointment to us,” said Chairman and CEO Jamie Dimon. “We demand and expect better of our people. The lesson here is that the conduct of a small group of employees, or of even a single employee, can reflect badly on all of us.”
Benjamin M. Lawsky, the US Superintendent of Financial Services at the New York State Department (NYDFS), has issued a truly damning report into Barclays.
It explains how the bank conspired with rivals to trigger its clients stop-loss orders, in a “Heads I Win, Tails You Lose” approach to FX trading.
Lawsky adds bluntly:
Put simply, Barclays employees helped rig the foreign exchange market.
In one instance, a manager told his staff that their aim was to give customers the worst deal they could get away with. Another had a remarkable rallying cry: “if you ain’t cheating, you ain’t trying.”
For example:
Photograph: NYDFS
NYDFS also explains how the collaboration between banks was crucial:
Without the active cooperation and coordination among the traders at multiple banks, via the use of chat rooms, the Barclays trader would have had neither the information to indicate that pushing the price was feasible, since there were not large contrary orders pending, nor the tools to attempt to accomplish that forced, temporary push lower.
David Hillman, spokesperson for the Robin Hood Tax campaign, argues that today’s “colossal” fines may not be enough to stamp out bad behaviour:
“It’s clear our softly softly approach to the finance industry isn’t working. Fines alone are not enough - much bolder action is needed to ensure banks work in our greater interest.”
The City must embrace a major cultural shift to avoid a repeat of the FX scandal, argues professor Mark Taylor, Dean of Warwick Business School.
He says:
Imposing heavy penalties - together with the accompanying adverse publicity - is one way of shifting that culture.
“This sort of practice strikes at the heart of business ethics and is yet another blow to the integrity of the banks. Our pension funds invest billions of pounds in the financial markets and if they are being cheated in this way it affects every one of us.
A bank’s culture is the responsibility of those at the top; Taylor wonders whether any senior executives will now resign.
Taylor is a former foreign exchange trader. He reckons that it could make sense to end the practice of taking a daily ‘fix’ of FX rates -- which proved a tempting target for some traders, so has experience of the market.
“Regulation of the forex markets would be very difficult, but one solution would be to take away the temptation to do this by taking the average over an hour - so 30 minutes either side of 4pm fix rather than 30 seconds. It’s a simple, workable solution because it would be a lot harder, if not impossible, to move a market as big as the FX market for an hour. Removing the incentive is much better than regulation because of the global, decentralised nature of the foreign exchange market.”
Cornell Law professor Robert Hockett says it’s significant that the banks have admitted guilt in criminal, not merely regulatory, investigations.
These are the first admissions of criminal guilt by large banking concerns in many, many years.
And with similar investigations into benchmark interest rate and precious metal price manipulation schemes still underway, there are likely to be more such to come.
Today’s case also confirms that some traders knew very well in 2008 that the Libor rate (not to be confused with today’s FX fines) was being manipulated.
Here’s a snippet from its settlement with UBS, showing one newbie being brought up to speed by an old hand:
This really is shocking -- UBS staff were making gestures between each other to mark up the prices that they offered customers, in the hope of making illicit profits.
UBS salesmen used elaborate internal system, involving hand signals and "hoots," to trick their customers. pic.twitter.com/2OL8uxMlTs
It includes links to the five separate pleas, from Barclays, Royal Bank of Scotland, JP Morgan, Citigroup and UBS.
It also includes this stinging rebuke, from Assistant Attorney General Bill Baer:
The charged conspiracy fixed the U.S. dollar – euro exchange rate, affecting currencies that are at the heart of international commerce and undermining the integrity and the competitiveness of foreign currency exchange markets which account for hundreds of billions of dollars worth of transactions every day.
“The seriousness of the crime warrants the parent-level guilty pleas by Citicorp, Barclays, JPMorgan and RBS.”
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