Banks Fined $5.7 Billion Over Fraud and Abuse
PUBLISHED ON: May 21, 2015
5 Banks Broke The Law
In total, 5 major banks were found to be guilty of manipulating the markets. Barclays, JP Morgan (JPMPRD), Citigroup (C), UBS , and the Royal Bank of Scotland all settled an array of criminal charges with a big pile of cash.
LIBOR And FOREX Fraud Punished With Massive Fines
Most investors are familiar with the FOREX currency exchange, but LIBOR has only recently made the news. LIBOR rates are the interest rates that banks charge each other for short-term capital loans, and so by artificially manipulating the rates these banks were able to secure a profit from their competitors. The fines will be paid to a variety of sources, including the Federal Reserve and Justice Department.
Fed, Department of Justice, and Banking Regulators All Involved
It wasn't just one institution that levied the fines against the banks for breaking the law. At least 4 major regulatory bodies have found evidence of wrongdoing in their jurisdiction, and all were involved in holding the banks accountable. The Fed was key in putting together a case for FOREX manipulation, while banking regulators in New York and London primarily focused on fraud and abuse in artificially setting high LIBOR rates. The Department of Justice played a role in both cases.
Total Fines Add Up To $5.7 Billion
In total, the fines paid by all 5 banks add up to an astonishing $5.7 billion, with the potential for more on the way. $1.6 billion will go to the Federal Reserve as part of the settlement deal, with the Department of Justice raking in another $1 billion. The balance of the fines will be paid to the banking regulators, including a $2.4 billion chunk by Barclay's alone.
Barclays To Fire Employees As Part Of Settlement
As part of a settlement with the Justice Department, Barclays will fire 8 of the employees that have been found responsible for the scheme. The rest of the banks will only have to pay the aforementioned fines for their part in the act. The Barclays employees were singled out as having been the people who originally came up with the FOREX scam, which involved manipulating exchange rates through the movement of capital in both foreign and domestic markets.
Settlement Has Been A Long Time Coming
The Department of Justice, in concert with the other regulatory bodies and the Fed, have been putting this case together for over a year. This is the culmination of a months-long battle between the sides, with the banks initially claiming that they did nothing wrong. The payout is one of the largest in history for this sort of crime.