Traders at RBS, Barclays, Citi, JPMorgan and MUFG used chat rooms to rig foreign exchange spot trading.

By Rochelle Toplensky in Brussels, Stephen Morris and Eva Szalay in London

The Financial Times (16 May, 2019, 6:43 AM EDT) Brussels has fined Barclays, RBS, Citigroup, JPMorgan and MUFG €1.07bn for participating in cartels to manipulate the foreign exchange market for 11 currencies.

EU officials found that two separate cartels used chat rooms, dubbed the “Three Way Banana Split”, “Essex Express” and “Semi-Grumpy Old Men”, to share information about customers’ orders, prices and other trading activities in order to manipulate the spot markets.

Citigroup was hit with the biggest fine of €311m, followed by RBS with €249m, JPMorgan at €229m, Barclays at €210m and Japan’s MUFG with about €70m.

UBS participated in the cartels but was not fined because it alerted EU officials to the two cartels. The other banks chose to settle the charges with EU regulators and their fines were reduced by 10 per cent.

The EU is the last major regulatory authority to conclude its investigation into collusion among traders to manipulate major currency benchmarks and exchange rates — allegations that first surfaced in 2013.

But the end of the probe will now clear the way for civil suits in the region, with law firm Scott and Scott poised to launch the European leg of a US class action lawsuit that resulted in a $2.3bn settlement with 15 banks.

The anti-competitive activity took place between 2007 and 2013 for the euro, pound, yen and Swiss franc, the US, Canadian, New Zealand and Australian dollars, and the Danish, Swedish and Norwegian crowns.

The information shared “enabled them to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when. Occasionally, these information exchanges also allowed the traders to identify opportunities for co-ordination,” according to the EU.

Authorities in the UK, US, Switzerland and Singapore have already hit 15 banks with more than $10bn in fines since 2014 relating to currency collusion, while investigations have also led to multibillion-dollar settlements in civil cases.

There are still lawsuits filed in the US and UK against some banks to recover damages on behalf of several investment managers.

“Foreign exchange spot trading activities are one of the largest markets in the world, worth billions of euros every day,” said Margrethe Vestager, European competition commissioner. “Today we have fined Barclays, the Royal Bank of Scotland, Citigroup, JPMorgan and MUFG Bank and these cartel decisions send a clear message that the commission will not tolerate collusive behaviour in any sector of the financial markets.”

“We are pleased to resolve this historical matter, which relates to the conduct of one former employee. We have since made significant control improvements,” said a spokesman for JPMorgan.

A spokesman for Barclays declined to comment. The British bank took a £240m provision related to the forex probe at the end of 2017, according to a filing.

RBS acknowledged the conclusion of the investigation and said in a statement that its €249m fine was “fully covered by existing provisions”. It added that it was co-operating with other unnamed authorities on further, similar probes into past misconduct in currency trading and could face more “material” penalties and consequences.

The EU said there was another investigation involving Credit Suisse, regarding “an alleged infringement which may have taken place in another chatroom” but it declined to provide any further details on this case.

Credit Suisse said it “does not believe that its employees engaged in any conduct in the FX markets which violated the European Union’s competition rules”. It added that it was co-operating with the EU investigation “but intends to vigorously contest the substance of the allegations”.

Lawyers for investors in the US civil case have been waiting for the ruling to launch the European leg of claims. David Scott, managing partner of Scott+Scott, the co-lead on the US class action claim, said European investors remained uncompensated.

“We’ve been waiting for this step before initiating a recovery action. Our firm will be working to recoup losses suffered by non-US pension funds, asset managers, insurance companies and multinational corporations, among others, as a result of the banks’ wrongdoing,” said Belinda Hollway, a Scott+Scott partner.

LITANY OF FX LITIGATION

June 2013: Press reports emerge of collusion and manipulation of the 4pm WM/R benchmark.

November 2014: UK’s Financial Conduct Authority fines Citi, JPMorgan, HSBC, Royal Bank of Scotland and UBS a total of $1.7bn. The Commodity Futures Trading Commission levies a $1.4bn penalty on the same banks.

The Office of the Comptroller of the Currency fines Citi and JPMorgan $700m.

Swiss regulator FINMA issues a $138m penalty to UBS.

May 2015: The US Department of Justice agrees guilty pleas with Citicorp, JPMorgan, Barclays, Royal Bank of Scotland and UBS for a total fine of $2.7bn.

The US Federal Reserve fines UBS, Barclays, Citi, JPMorgan, RBS and Bank of America a total of $1.8bn.

June 2015: The New York Department of Financial Services issues a penalty of $205m to Deutsche Bank November 2015: The New York Department of Financial Services fines Barclays an additional $150m

May 2017: The New York Department of Financial Services fines BNP Paribas $350m

July 2017: The US Federal Reserve Board fines BNP Paribas $246m

November 2017: The New York Department of Financial Services fines Credit Suisse to the tune of $135m June 2018: The New York Department of Financial Services fines Deutsche Bank $205m

February 2019: The New York Department of Financial Services fines Standard Chartered $40m.