Antitrust regulators in the European Union acted against many erring banks for alleged currency fraud involving fixing of spot foreign exchange. 

The EU action targeted Barclays, Citigroup, J.P. Morgan, MUFG and Royal Bank of Scotland. The banks were slapped a total fine 1.07 billion euros or $1.2 billion.  

It was found that extensive rigging of spot foreign exchange took place and involved 11 currencies.

Zero tolerance to collusive behavior

Announcing the decision, EU Commissioner Margrethe Vestager on Thursday said: “We have fined Barclays, The Royal Bank of Scotland, Citigroup, J.P. Morgan, and MUFG Bank and these cartel decisions send a clear message that the commission will not tolerate collusive behavior in any sector of the financial markets.”

 “Foreign exchange spot trading activities are one of the largest markets in the world, worth billions of euros every day,” noted Vestager in a press release and added that the unsavory behavior of some banks “undermined the integrity of the sector” at the cost of the European economy and European consumers.

However, Swiss bank UBS was spared from 285 million euro penalty since it acted as a whistleblower by alerting the European Commission about the action of some cartels working to fix forex markets.

Chat rooms used for sharing sensitive information

The investigation against these banks started in 2013 and the allegations included forex traders from various banks having exchanged sensitive information via online chat rooms.

“The information leaks enabled them to make informed market decisions on sale or buy of currencies they held in their portfolios with the right timing,” said the Commission report.

In the U.S also, regulators grappled with a similar case. The banks on their radar included Barclays, BNP Paribas, Citigroup, J.P. Morgan, Royal Bank of Scotland and UBS. Later they were fined more than $2.8 billion.

Forex agents shared information in  chat rooms

The information exchanged in chat rooms pertained to the following areas.

·         Customers' orders

·         Names of clients, currencies, and amounts

·         Prices on specific transactions

·         Open risk positions in currencies

·         Details needed for planned trading

Banks’ reaction            

RBS said the fine was a “reminder of how badly the bank lost its way in the past” and added that its culture and controls have changed fundamentally. But Barclays did not comment.

The news of penal action pulled down shares of Barclays and RBS and they traded lower while UBS moved up a bit. Shares of J.P. Morgan and Citigroup also fell slightly in pre-market trading.