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U.K. Watchdog Head Says Banks Should Have Known About Chat Rooms

Financial Conduct Authority CEO Martin Wheatley
Financial Conduct Authority Chief Executive Officer Martin Wheatley. Photographer: Brent Lewin/Bloomberg

March 20 (Bloomberg) -- Investment banks should have known about foreign-exchange traders using chat rooms that had the potential to rig currency prices, the head of the U.K.’s financial regulator said.

There should have been controls over bank employees that conduct trades and are allowed to submit rates, Martin Wheatley, the Financial Conduct Authority’s chief executive officer, said in an interview with Bloomberg TV’s Angie Lau in Hong Kong.

“It’s incredible that a bank should not know that traders having unmonitored access to private chat rooms to talk to a bunch of mates that they’ve had relationships with or worked with over the years,” Wheatley, 55, said.

The FCA, created in April 2013, said in October it was opening a formal probe into currency-rate trading, joining regulators in the U.S. and Switzerland in reviewing the $5.3 trillion-a-day market. The FCA is focusing on the WM/Reuters rates, which are published hourly for 160 currencies and half-hourly for the 21 most-traded.

“The surprise for me is that the banks did not check, did not do their homework, and look at how chat rooms were being used,” said Wheatley. He was CEO of Hong Kong’s Securities and Futures Commission for five years before joining the FCA’s predecessor, the Financial Services Authority, in September 2011, according to a profile on the FCA’s website.

As head of the U.K. watchdog, Wheatley meted out a record 474 million pounds ($784 million) in fines to financial firms last year, more than seven times higher than in 2011. The FCA’s top penalties included charging JPMorgan Chase & Co. 137.6 million pounds as part of a probe into a $6.2 billion loss by Bruno Iksil, the trader known as the London Whale.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Angie Lau in Hong Kong at alau42@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Darren Boey, Tan Hwee Ann

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