Big banks pay $4.2 billion to settle exchange-rate rigging charges

Several large banks have agreed to pay roughly $4.25 billion in penalties for attempting to manipulate benchmark rates for foreign exchanges.

The Commodity Futures Trading Commission announced Wednesday morning that five banks agreed to pay $1.4 billion in U.S. sanctions, which apply to Citibank, HSBC, JPMorgan, RBS and UBS. The regulator said the misbehavior began at some banks in 2009, and ran all the way into 2012.

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British regulators also announced penalties of roughly $1.7 billion against the same institution. And shortly thereafter, the Office of the Comptroller of the Currency announced that Bank of America, Citibank and JPMorgan agreed to pay another combined $950 million to settle separate manipulation charges around foreign exchanges.

The attempt to rig the exchange rates came at the same time some of these banks were under investigation for additional accusations of rate-rigging, after news emerged that several financial institutions worked to manipulate another benchmark, the London Interbank Offered Rate (Libor). UBS and RBS have already faced penalties for Libor manipulation.

The CFTC said Wednesday that traders at these banks conspired with traders elsewhere to manipulate foreign exchange rates to maximize profits. The traders used a private chat room, where they exchanged confidential customer information and trading information, and conspired to work together to manipulate rates so they all profited, the regulator said.

However, the CFTC also noted that the institutions showed “significant cooperation” during the probe, and noted that UBS was the first bank to report the issue to regulators.

UBS had previously agreed to pay $1.5 billion to settle charges of Libor rigging.

— This post was updated at 10:11am.