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The banks exchanged sensitive information and trading plans in a chatroom called “Sterling Lads.” As a result, traders were able to decide on whether and when to trade the currencies they had in their portfolios based on the information they received, without taking risks.
Five big banks, namely UBS Group AG (SWX: UBSG), Barclays PLC (NYSE: BCS), Credit Suisse Group (NYSE: CS), Royal Bank of Scotland (RBS), and HSBC Holdings Plc (NYSE: HSBC), were fined a total of €344 million ($389.6 million) for participating in a foreign-exchange spot trading cartel. According to the European Commission, foreign exchange traders in these banks discussed sensitive information and trading plan.
Commissioner Margrethe Vestager commented:
“Today we complete our sixth cartel investigation in the financial sector since 2013 and conclude the third leg of our investigation into the Foreign Exchange spot trading market. Our cartel decisions to fine UBS, Barclays, RBS, HSBC, and Credit Suisse send a clear message that the Commission remains committed to ensuring a sound and competitive financial sector that is essential for investment and growth. Foreign exchange spot trading activities are one of the largest financial markets in the world. The collusive behavior of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers.”
The EU’s investigation focused on the trading of the G10 currencies. They include the British pound, euro, US dollar, Japanese yen, and the Swiss franc. It turned out that the banks exchanged sensitive information and trading plans in a chatroom called “Sterling Lads.” Besides, they coordinated trading strategies. As a result, traders were able to decide on whether and when to trade the currencies they had in their portfolios based on the information they received, without taking risks.
The banks that participated in the trading cartel were charged according to the Commission’s 2006 Guidelines on fines. Notably, HSBC was fined €174.3 million ($197 million), Barclays got a €54.3 million fine ($61.4 million), and NatWest was fined €32.5 million ($36.7 million). All the sums represented 10-15 percent reductions as the banks cooperated with the EU in the investigation.
Credit Suisse received a 4 percent reduction on its penalty that totaled €83.3 million ($94.1 million).
Other Examples of Foreign-Exchange Trading Cartels
In 2019, there was a similar case of foreign currency manipulation. At that time, the European Commission fined Barclays, RBS, Citigroup, and JPMorgan with a total of €811.2 million (then $907 million). The banks took part in the so-called “Three-Way Banana Split” cartel that was in operation in 2007-2013. In addition, the Commission penalized Barclays, RBS, and MUFG Bank €257.68 million (then $288 million) for their involvement in the “Essex Express” cartel that operated in 2009-2012.
Earlier this year, the European Commission conducted an investigation into a separate forex trading scheme. It fined Nomura, UBS, and UniCredit banks with a total of €371 million ($453 million) for their participation in a cartel scheme through a group of traders.