Banks Said to Get Enforcement Letters in FX-Rigging ProbeJesse Hamilton, Dakin Campbell, Suzi Ring and Gavin Finch
Banks including JPMorgan Chase & Co., Citigroup Inc. and Morgan Stanley have been notified that regulators are preparing enforcement actions on currency rigging, people familiar with the investigation said.
Talks are progressing between banks, the U.S. Federal Reserve and the Office of the Comptroller of the Currency to settle investigations into alleged manipulation of foreign-exchange markets, according to two people, who asked not to be identified because the discussions are private. Some firms have received so-called 15-day letters outlining the agencies’ findings and warning that enforcement actions are likely, the people said.
Enforcement actions can range from cease-and-desist orders to fines to banning bankers from the industry. The letters typically detail the investigators’ findings and give recipients about 15 days to offer a written defense. Such notices usually open a final stage of settlement negotiations.
U.S. regulators are coordinating with the U.K.’s Financial Conduct Authority to settle some of the probes by November, according to two people. The FCA is in settlement talks with firms including Barclays Plc, Citigroup, HSBC Holdings Plc, JPMorgan, Royal Bank of Scotland Group Plc and UBS AG. It scheduled meetings with some banks for as soon as next month to discuss penalties, the people said.
A few investigations are taking longer, and talks with firms such as Bank of America Corp. and HSBC haven’t progressed as far, according to some of the people.
Firms have cooperated with FCA and U.S. banking regulators, conducting their own investigations and handing over findings, helping to speed up probes that just began last year. Authorities around the world have been looking into allegations that dealers at the biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark used by pension funds and money managers to determine what they pay for foreign currencies.
More than 25 traders have been fired, suspended or put on leave after the allegations became public last year.
Spokesmen for the banks, the OCC, Fed and FCA declined to comment on the status of the investigations.
The FCA is trying to fast-track the process to avoid it going on for as long as its probe into the London interbank offered rate, or Libor. The regulator is seeking to keep the scope of the deal narrow to achieve this, people with knowledge of the discussions said in July.
Unlike in the U.S., the FCA hasn’t informed several banks of the case it has against them, some of the people said. That’s unusual, according to Richard Burger, a lawyer at London-based RPC LLP who previously worked at the regulator.
Informal pre-settlement talks are normal “because it warms up firms to the idea of settlement and means an agreement is usually reached much more quickly at the end,” Burger said. “In a global investigation like this though, the regulator may be trying to avoid any mis-communication of messages between banks by not giving any information on its case before the formal talks begin.”
Still unclear is the size of the fines that might be involved, according to two people. Sanford C. Bernstein Ltd. analyst Chirantan Barua said in a note yesterday that Barclays could incur fines of as much as 700 million pounds ($1.2 billion) to resolve the currency-rigging probes.
Citigroup, Deutsche Bank AG, Barclays and UBS are the top four currency dealers, according to Euromoney Institutional Investor Plc’s annual survey.