Five of the world's largest banks
are to pay fines totalling $5.7bn (£3.6bn) for charges including
manipulating the foreign exchange market.
Four of the banks - JPMorgan, Barclays, Citigroup and RBS - have agreed to plead guilty to US criminal charges.
The fifth, UBS, will plead guilty to rigging benchmark interest rates.
Barclays
was fined the most, $2.4bn, as it did not join other banks in November
to settle investigations by UK, US and Swiss regulators.
Barclays is also sacking eight employees involved in the scheme.
US
Attorney General Loretta Lynch said that "almost every day" for five
years from 2007, currency traders used a private electronic chat room to
manipulate exchange rates.
Their actions harmed "countless consumers, investors and institutions around the world", she said.
Separately,
the Federal Reserve fined a sixth bank, Bank of America, $205m over
foreign exchange-rigging. All the other banks were fined by both the
Department of Justice and the Federal Reserve.
Cartel threat
Regulators
said that between 2008 and 2012, several traders formed a cartel and
used chat rooms to manipulate prices in their favour.
One Barclays trader who was invited to join the cartel was told: "Mess up and sleep with one eye open at night."
Several
strategies were used to manipulate prices and a common scheme was to
influence prices around the daily fixing of currency levels.
A daily exchange rate fix is held to help businesses and investors value their multi-currency assets and liabilities.
'Building ammo'
Until February,
this happened every day in the 30 seconds before and after 16:00 in
London and the result is known as the 4pm fix, or just the fix.
In
a scheme known as "building ammo", a single trader would amass a large
position in a currency and, just before or during the fix, would exit
that position.
Other members of the cartel would be aware of the plan and would be able to profit.
"They
engaged in a brazen 'heads I win, tails you lose' scheme to rip off
their clients," said New York State superintendent of financial services
Benjamin Lawsky.
The fines break a number of records. The
criminal fines of more than $2.5bn are the largest set of anti-trust
fines obtained by the Department of Justice.
The £284m fine imposed on Barclays by Britain's Financial Conduct Authority was a record by the regulator.
Meanwhile,
the $925m fine imposed on Citigroup by the Department of Justice was
the biggest penalty for breaking the Sherman Act, which covers
competition law.
The guilty pleas from the banks are seen as
highly significant as banks have settled previous investigations without
an admission of guilt.
The Attorney General warned that further wrongdoing would taken
extremely seriously: "The Department of Justice will not hesitate to
file criminal charges for financial institutions that reoffend.
"Banks that cannot or will not clean up their act need to understand - it will be enforced."
Analysis: Kamal Ahmed, BBC business editor
If
anyone in the City thought that the latest multi-billion pound fines
for the banks meant that they were now out of the regulatory woods, they
should think again.
The New York State Department of Financial
Services is still investigating Barclays, for example, over other
aspects of the foreign exchange market including electronic trading.
Barclays
is also being investigated in the UK over its Qatari fund raising
during the financial crisis and in America over the operation of its
"dark pool" electronic trading business.
Other allegations include manipulating the energy markets in California and the US precious metal market.
For
the Royal Bank of Scotland it is not a much rosier picture. The bank is
facing a class action from major investors over whether it gave the
correct information to the market during the financial crisis and is
also facing an investigation into its mortgage business in the US.
Civil legal actions on foreign exchange manipulation are also in the offing for both banks.
It looks like the major global banks are going to face many more "we deeply regret this behaviour" days ahead.
'Regain trust'
Royal
Bank of Scotland will pay fines totalling $669m (£430m) - $395m to the
Department of Justice and $274m to the Federal Reserve - to resolve the
investigations.
Ross McEwan, chief executive of RBS, said: "The
serious misconduct that lies at the heart of today's announcements has
no place in the bank that I am building.
"Pleading guilty for such
wrongdoing is another stark reminder of how badly this bank lost its
way and how important it is for us to regain trust."
Antony
Jenkins, Barclays chief executive, said: "The misconduct at the core of
these investigations is wholly incompatible with Barclays' purpose and
values and we deeply regret that it occurred.
"I share the
frustration of shareholders and colleagues that some individuals have
once more brought our company and industry into disrepute."
Shares in Barclays gained 3.4% and RBS rose 1.8%.
The
fines are "much lower than expected," said Chirantan Barua, an analyst
at Bernstein Research in London. "No retroactive massive Libor fine for
Barclays is a big positive, as is no reopening of the NPA (non-prosecution agreement).
"The fine came in £270m better than we expected for RBS, £850m better in the case of Barclays," he said.
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