On Thursday 16 May, the European Commission imposed fines totalling €1.07 billion, by means of two settlement decisions per transaction, on several banks for their participation in a foreign exchange spot trading cartel involving several currencies.
“Today, we have fined Barclays, The Royal Bank of Scotland [RBS], Citigroup, JP Morgan 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”, said Margrethe Vestager, Commissioner for Competition Policy.
Foreign exchange transactions (Forex) concern trading of currencies. When entities trade significant volumes of one currency for another, they usually go through a Forex trader, whose clients include asset managers, pension funds, hedge funds and banks.
Foreign exchange spot trades must be executed on the same day at the prevailing exchange rate. Following an investigation opened in September 2013, the Commission found that several traders who carried out foreign exchange spot trades in the most traded and liquid currencies (the Euro, the British Pound, the Japanese Yen, the Swiss Franc, the US, Canadian, New Zealand and Australian dollars, as well as Danish, Swedish and Norwegian crowns) on behalf of fined banks exchanged sensitive information and trading plans and even coordinated their strategies.
Through these exchanges of information, traders were able to make informed market decisions about whether to sell or buy currencies.
Two separate infringements were revealed during the Commission's investigation. The first consists of exchanges on three different discussion forums in a row, between 2007 and 2013, by traders from UBS, Barclays, RBS, Citigroup and JP Morgan. The second infringement took the form of an exchange on two discussion forums, from 2009 to 2012, by traders from UBS, Barclays, RBS and Bank of Tokyo-Mitsubishi (now MUFG Bank).
In setting the amount of the fines, the Commission relied on the 2006 Guidelines on fines. The institution took into account the values of sales made in the European Economic Area (EEA) by the cartel members, the gravity of the infringement, its geographical scope and its duration.
In addition, in view of the 2006 Leniency Notice, UBS was granted full immunity for disclosing the existence of the infringements, thus avoiding paying a fine of €285 million. In addition, with the exception of MUFG Bank, all banks cooperated during the investigation and therefore benefited from fine reductions. Finally, a further 10% reduction was granted to all companies because they acknowledged their participation in the cartels and their responsibility.
Thus, Citigroup will have to pay 310.776 million euros, RBS 249.214 million euros, JP Morgan 228.815 million euros, Barclays 210.324 million euros and MUFG Bank 69.750 million euros.
Reactions. In a press release, MUFG Bank reacted to this decision by saying that it took “this issue very seriously”. “We have completed a review of our internal procedures and have strengthened our monitoring framework to prevent the occurrence of similar issues in the future”, she added.
RBS and its subsidiaries also took note of the fine and stated that they are “cooperating with investigations and responding to inquiries from other government and regulatory authorities [including competition authorities] on similar issues [...]”. (Original version in French by Lucas Tripoteau)