Big banks finalise $5bn-plus settlements on foreign exchange

Five of the world's biggest banks are finalising agreements to collectively pay more than $5bn for allegedly manipulating foreign exchange markets, with an announcement expected as soon as Wednesday.

Barclays is expected to agree to pay about £2bn to the UK's Financial Conduct Authority and to the US's Department of Justice, Federal Reserve, Commodity Futures Trading Commission and the New York Department of Financial Services.

It is the only bank that will announce a UK fine this time round. The others were all part of a $4.3bn November settlement between six banks and the FCA, the CFTC and Swiss regulators.

JPMorgan Chase, Royal Bank of Scotland and Citigroup are all expected to pay as much as $1bn each to the DoJ, which was not part of the earlier settlement.

Subsidiaries of all three banks, as well as Barclays, are likely to plead guilty to US criminal charges, according to people familiar with the matter. The fine for Switzerland's UBS is unclear, and the bank and DoJ are still talking about possible criminal charges.

HSBC and Bank of America, which were among the banks to settle in November, will not be part of the latest settlement, people familiar with the matter said. All seven banks declined to comment.

The latest fines for rigging the $5.3tn-a-day forex market come after a lengthy inquiry into alleged collusion among banks to share information and co-ordinate their trading to manipulate exchange rates in ways that favoured the banks' books.

On Monday, the Bank of International Settlements, which comprises the world's most powerful central banks, said it was setting up a working group to develop a global code of conduct standards and principles on forex markets.

Securing agreements with the DoJ would mark a milestone for the banks, which have endured years of big fines for everything from interest rate rigging to money laundering, but there is still a long road to go.

The DoJ's criminal investigation into individuals is continuing and charges are not expected to be filed this week. The UK's Serious Fraud Office also has a parallel criminal inquiry open into individuals. DFS is also still investigating some aspects of the foreign exchange scandal.

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An added complication for Barclays and UBS is that the DoJ could decide to reopen its earlier criminal cases against both banks for manipulation of Libor interest rate benchmarks as a result of the coming forex settlements with them.

The DoJ could revoke the agreements it reached with the two banks in 2012 that allowed them to avoid prosecution for Libor manipulation if it finds they have committed crimes in the forex markets since then. Citi said in a regulatory filing that the DoJ would not prosecute the bank as a result of the Libor probe.

People familiar with the matter stressed that while banks now had a good idea of their fines from the DoJ, the figures could still change. Equally, the DoJ is keen to make an announcement on Wednesday, but the date could slip a day or two if the final negotiations are protracted.

To join this week's settlement, Barclays has agreed with the DFS to carve out the regulator's investigation into algorithms in the bank's forex trading platform from the overall agreement. Barclays pulled out of the November settlement because it wanted to settle with all regulators at once and the DFS was not ready to be part of that deal.

The five banks have already made substantial provisions for the fines. Barclays has taken slightly more than £2bn of total provisions, which are primarily for forex investigations and litigation.

Sergio Ermotti, UBS chief executive, said on May 5 that he expected UBS's existing provisions to be "enough to accommodate for any resolution" of the issues.

In the past two quarters, RBS has set aside provisions of $1bn to cover the cost of forex settlements. In a post-results conference call on April 30, Ewen Stevenson, RBS finance director, said he was confident that amount was "adequate for all of the discussions we can foresee in the US", although Ross McEwan, the bank's chief executive, said its forex fine would not be as high as $1bn.

Laura Noonan, Martin Arnold, Caroline Binham and Lindsay Fortado reported from London and Gina Chon reported from Washington

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