EU fines major banks 1 billion euros over currency cartels

The European Commission on Thursday fined five major banks €1.07 billion ($1.2 billion) for collusion in the foreign currency market.

The fines would normally have been 10% higher, but was reduced after the banks admitted their involvement.

What was revealed

EU anit-trust authorities uncovered two separate cartels:

  • Barclays, Royal Bank of Scotland, Citigroup and JPMorgan were find €811 million for trading within the "Forex — Three Way Banana Split" cartel.
  • Barclays, RBS and MUFG Bank were fined €257 million over the "Forex-Essex Express" cartel.
  • The cartels involved 11 currencies, including the US dollar, the British pound sterling, the euro and the Japanese yen.
  • Activities started in 2007 and 2009 respectively and ended in 2012 and 2013 resepectively.
  • Swiss bank UBS does not have to pay a fine as it informed the authorities of the cartels.

Zero tolerance

Competition Commissioner Margrethe Vestager stressed that markets offering spot foreign exchange trading are some of the world's largest and that "these cartel decisions send a clear message that the Commission will not tolerate collusive behavior in any sector of the financial markets," she said in a statement.

The behavior of these banks "undermined the integrity of the sector at the expense of the European economy and consumers," she added.

What are Spot Exchanges?

Companies changing large amounts of currency will often use a forex (foreign exchange) trader. Same-day spot order transactions are carried out at that day's exchange rate.

How did the collusion work?

The traders involved in the cartels, who were direct competitors, used chatrooms on a daily basis to exchange sensitive information. The Commission said it allowed the traders "to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when."

Not over yet:

A Commission spokesperson confirmed that further investigations into the spot trading market are still ongoing, but declined to give details.

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