FX Settlement Talks Between Banks, EU Regulator Said to Start

  • Fines are typically part of EU antitrust settlements
  • A final deal could take as long as a year to work out

The European Union has moved toward antitrust settlement talks with banks suspected of rigging currency markets as part of a global investigation that’s already led to multibillion dollar fines in the U.S. and U.K., according to people familiar with the case.

The EU’s three-year-long probe has advanced to a confidential stage in which settlement talks take place, according to people who asked not to be named because the status of the case is private. It could take as long as a year to iron out a deal with the lenders, which would likely include fines.

While the EU has refused to identify its targets, Barclays Plc and HSBC Holdings Plc have previously said their foreign-exchange trading is being reviewed by the EU and other banks have said they are cooperating with global regulators on FX probes.

Deutsche Bank AG, which got an all-clear sign from the U.S. regulator of derivatives and futures last month in relation to alleged FX-rigging, hasn’t received any EU requests pertaining to the case in months and may escape enforcement action from EU antitrust authorities, according to another person, who spoke on condition of anonymity.

A spokesman for the EU and bank officials all declined to comment on the investigation.

Global Fines

The EU has lagged behind as authorities in the U.S., the U.K. and Switzerland issued about $10 billion in penalties to a group of banks including Bank of America Corp., Citigroup Inc.Royal Bank of Scotland Group Plc and UBS Group AG for what U.S. Attorney General Loretta Lynch called a “brazen display of collusion” to game markets.

Banks that seek to settle with the EU must remain entirely silent about the process once it’s underway or risk losing their right to a 10 percent discount in their penalties, said one of the people.

The EU settlement procedure allows regulators to levy lower penalties in exchange for cooperation and an acceptance of wrongdoing.

Even though the commission is often being late to the party, its fines can sting. In late 2013, EU antitrust regulators issued penalties initially worth a total of 1.7 billion euros ($1.8 billion) as part of a multi-bank settlement related to manipulation of the Libor and Euribor benchmarks -- a year and a half after Barclays was fined by U.K. and U.S. authorities.

The EU fines were reduced earlier this year by 218 million euros after the EU slashed Societe Generale SA’s Euribor penalty due to a calculation “mistake” the bank made in supplying sales data to antitrust regulators.

The initial settlement talks in the FX case will allow banks to get an overview during a presentation of what type of anti-competitive behavior the EU plans to target, and should clarify which firms are on and off the hook.

EU Competition Commissioner Margrethe Vestager has made few comments about the case, indicating a year ago that the EU’s currency probe was still preliminary and remained far from reaching a conclusion.

As part of the investigation, the EU has been flooded with transcripts of currency traders’ chat-room conversations as a number of banks scramble to earn good behavior points with regulators, one person said earlier this year.

But while instances of exchanges of trading information are numerous, the commission is keen to focus on the most egregious conduct where multiple traders colluded to align positions and push transactions through at the same time, another person said at the time.

— With assistance by Aoife White

    Before it's here, it's on the Bloomberg Terminal.