The European Commission has announced sanctions against five banks for their collusion in G10 spot FX markets.
The banks, Barclays, Credit Suisse, HSBC, RBS and UBS, have been fined a collective EUR 344 million for their actions, although UBS, which brought the activity to the attention of the EC, has been granted a 100% reduction under European Union leniency rules.
European commissioner Margrethe Vestager, who is in charge of competition policy for the region, says, “Today we complete oursixth cartel investigation in the financial sector since 2013 and conclude the third leg of our investigation into the foreign exchange spot trading market. Our cartel decisions to fine UBS, Barclays, RBS, HSBC and Credit Suisse send a clear message that the Commission remains committed to ensure a sound and competitive financial sector that is essential for investment and growth. Foreign exchange spot trading activities are one of the largest financial markets in the world. The collusive behaviour of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers.”
The Full FX View
Just in case anyone thought the chat room saga would go away, here it is again in the spotlight. For the FX industry the EC’s laboured investigation (it is more than eight years since authorities started investigating events) is inconvenient as it once more thrusts historical bad behaviour into the spotlight, but it needs to be remembered that these are historical acts that are now covered by the FX Global Code
Perhaps the interesting aspect of this is the stance of Credit Suisse which, almost alone amongst banks, has refused to admit guilt and co-operate (in the authorities’ sense of the word) with the investigations. Other banks that have co-operated have found themselves with little leeway when it comes to facing civil lawsuits and the fines have been topped up by compensation for clients.
In this case Credit Suisse may have missed a 50% reduction on a fine of EUR 83 million, but it is probably on much firmer ground when it comes to defending itself against civil actions – and the lack of an “easy win” may deter some plaintiffs from pursuing the bank when other institutions clearly offer a smoother path. It could be, by taking a bigger fine, the bank could end up better off in the long run – EUR 83 million could be a cheap cut?
The latest fines relate to activity in yet another chat room, this time Sterling Lads, where traders inappropriately shared information about client activity, orders, and spreads. UBS received a full immunity, thus avoided a EUR 94 million fine, while, Barclays, RBS and HSBC received partial reductions under EU Leniency Notices, meaning they were fined just over EUR 54 million, EUR 32 million and EUR 174 million respectively. Credit Suisse, which did not cooperate under leniency or settlement procedures (which effectively means admitting guilt) was fined just over EUR 83 million after a 4% discount was allowed due the bank “not being liable for all aspects of the case”.
Good news for the industry is that the EC says in its latest notice that these decisions “complete the wider Commission’s investigation”. Previously it has fined six banks for traders’ activity in a number of chatrooms.