Banks plead guilty: More details

May 21, 2015 11:05 AM

Citi behavior "embarrassment" - CEO

Citicorp will pay $925 million, the highest criminal fine, as well as $342 million to the U.S. Federal Reserve.

Its traders participated in the conspiracy from as early as December 2007 until at least January 2013, according to the plea agreement.

Traders at Citi, JPMorgan and other banks were part of a group known as "The Cartel" or "The Mafia," participating in almost daily conversations in an exclusive chat room and coordinating trades and otherwise fixing rates.

The bank's behavior was "an embarrassment," Citigroup Chief Executive Officer Mike Corbat said in a memo to employees, which was seen by Reuters.

Corbat said an internal investigation should conclude shortly. So far nine people have been fired.

University of Virginia law school professor Brandon Garrett said the last case comparable to Citi or JPMorgan, involving a major U.S. financial institution pleading guilty to criminal charges in the United States was Drexel Burnham Lambert in 1989.

JPMorgan's share of the criminal fine was $550 million, based on its involved from July 2010 until January 2013. It also agreed to pay the Federal Reserve $342 million.

JPMorgan Chase said the conduct underlying the antitrust charge was "principally attributable to a single trader" who has been fired.

In New York, shares in JP Morgan and Citigroup were down 0.7% and 0.8%, respectively.


"If you ain't cheating, you ain't trying"

Britain's Barclays was fined a record $2.4 billion. Its staff continued to engage in misleading sales practices despite a pledge by CEO Antony Jenkins to overhaul the bank's high-risk, high-reward culture.

Barclays' sales staff would offer clients a different price to the one offered by the bank's traders, known as a "mark-up" to boost profits. Generating mark-ups was a high priority for sales managers, with one employee noting, "If you ain't cheating, you ain't trying."

Barclays fired four traders in the last month. New York state's banking regulator Benjamin Lawsky ordered the bank to fire another four who had been suspended or placed on paid leave.

Barclays had set aside $3.2 billion to cover any forex-related settlement. Shares in the bank rose more than 3% to an 18-month high as investors welcomed the removal of uncertainty over the forex scandal.

UBS was the first firm to report the misconduct to U.S. officials. It pleaded guilty and will pay a $203 million criminal penalty for breaching a non-prosecution agreement over manipulation of the Libor benchmark interest rate, in part based on its forex practices.

UBS, Switzerland's largest bank, will also pay $342 million to the Federal Reserve over attempted manipulation of forex rates.

The Royal Bank of Scotland will pay a criminal fine of $395 million, and a $274 million penalty to the Fed.

The U.S. central bank fined six banks for unsafe and unsound practices in the foreign exchange markets, including a $205 million fine for Bank of America.

UBS's penalty was lower than expected, and helped its shares rise to their highest in six-and-a-half years.

The global investigation into manipulation of foreign exchange rates has put the largely unregulated forex market on a tighter leash and accelerated a push to automate trading. Authorities in South Africa announced this week they were opening their own probe.

Page 2 of 2
About the Author