Currency Collusion: Five Banks Fined by EU for Manipulating the Foreign Exchange Market

May 30, 2019

2 min read

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What's going on here?

The “Banana Split” cartel (made up of traders from Barclays, RBS, JP Morgan and Citigroup) and the “Essex Express” cartel (consisting of traders from Barclays, RBS and MUFG) have been fined €1.07 billion by the European Commission for rigging the foreign exchange market.

What does this mean?

The five banks involved (Barclays, RBS, JP Morgan, Citigroup and MUFG) have settled for €1.07 billion for insider rigging that took place between 2007 and 2013. UBS, which was also involved, was not fined as it acted as the whistle-blower in this case of currency collusion. Traders shared private information via group chats named “Three-way banana split” and “Essex Express ‘n the Jimmy” (since all the traders in the group chat, bar “Jimmy”, lived in Essex). They shared details of planned trades as well as details of specific transactions. In 2014, all 6 banks (including UBS) were fined a total of £2.6 billion by UK and US regulators. Swiss regulators also fined UBS 134 million Swiss Francs in 2014.

Margrethe Vestager (who serves as the European Competition Commissioner) commented that the banks “undermined the integrity of the sector at the expense of the European economy and consumers”. The currency market trade on average more than $5 trillion every day, according to the Bank for International Settlements.

Why should law firms care?

This is an historic case of illegal collusion between traders and banks, which has symbolised “how badly banks have lost their way in the past”, as one RBS spokesperson put it.

All the banks have made the argument that regulation has improved and integrity has been restored in the ensuing decade with JP Morgan blaming “the conduct of one former employee” and MUFG reaffirming its commitment to ensure “integrity and compliance with the regulatory authorities”.

Despite the banks’ attempts to brush this case under the carpet as quickly as possible, law firms have argued that this is far from the end. The currency market is a huge and widespread part of the global financial system. The currencies involved in this illegal collusion were the Euro, Pound, Yen, Swiss Franc and the US, Canadian, New Zealand and Australian Dollars, and the Danish, Swedish and Norwegian Crowns. This list offers some perspective on how widespread the effects of this scandal may be.

So, this is like opening Pandora’s box. As Lambros Kilaniotis (a Partner at RPC) explained, this is indeed an “an open invitation for parties who may have been impacted by these cartels to sue these banks”.

And this a worrying reality for the banks involved. Several UK and US investment managers are filing lawsuits, and the EU noted that Credit Suisse was being investigated regarding a potential infringement of regulation via a chatroom.

For law firms, this is a great opportunity to remedy the banks’ wrongs. Belinda Hollway (a Partner at law firm Scott and Scott) said that law firms must fight on behalf of “non-US pension funds, asset managers, insurance companies and multinational corporations, among others” who were affected by the actions of the bankers.

But, with new investigations still ongoing, could this be just the tip of the iceberg?

Report written by Will H

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