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Friday, January 21, 2022

Banks fined over collusion in currency trading


Banks including Barclays, RBS and HSBC have been fined €344m (£293m) by the European Commission for colluding in the trading of foreign currencies.

It was discovered that traders acting on behalf of five banks exchanged sensitive information via Sterling Lads, an online chatroom.

This enabled these traders to make educated decisions about when to buy and sell currencies.

According to the commission, this was “collusive behaviour.”

It also “undermined the integrity of the financial sector at the expense of the European economy and consumers,” according to the statement.

In addition to Barclays, RBS, and HSBC, the commission fined UBS and Credit Suisse.

Its investigation focused on the trading of the G10 currencies, which include the British pound (or sterling), the euro, the US dollar, the Japanese yen, and the Swiss franc.

When businesses exchange large sums of different currencies, they typically do so through a foreign exchange, or “Forex,” trader acting on behalf of a bank.

Asset managers, pension funds, major corporations, and other banks are among their clients.

According to the investigation, some traders from the five banks shared their plans and “occasionally coordinated their trading strategies” via the Sterling Lads chatroom.

Margrethe Vestager said the fines sent a “clear message”

Sometimes these workers would coordinate by “standing down,” in which some would temporarily stop trading to avoid interfering with another trader.

“These information exchanges enabled traders to make informed market decisions on whether and when to sell or buy the currencies in their portfolios, as opposed to a situation in which traders acting independently from each other take an inherent risk in making these decisions,” the commission stated.

The decision to fine the banks, according to EU Competition Commissioner Margrethe Vestager, sends “a clear message that the commission remains committed to ensuring a sound and competitive financial sector, which is essential for investment and growth.”

UBS was granted immunity for revealing the existence of the cartel, avoiding a €94 million fine.

Barclays, RBS, and HSBC were fined a total of €261 million, with reductions for cooperation with the investigation.

These four banks reached an agreement with the European Commission to settle their cases.

Credit Suisse has been fined €83.2 million. According to the commission, the bank “failed to cooperate under the leniency or settlement procedures.”

Nonetheless, the bank was granted a 4% reduction in its fine “to reflect the fact that Credit Suisse is not held liable for all aspects of the case,” according to the statement.

The commission’s investigation into the foreign exchange markets resulted in the third decision.

Others involved traders exchanging information via online chatrooms with names like “Two and a Half Men” and “Essex Express ‘n the Jimmy.”

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