Investigations into the forex scandal have revealed that six major global banks colluded for at least a decade in order to manipulate exchange rates – for their own gain of course. Time and again banks have proven that fines don’t deter them from doing as they please; sanctions must be stronger.
Barclays, Citibank, HSBC, JPMorgan, RBS and UBS manipulated the daily benchmark price of global currencies on the forex market by sharing information about orders from their clients. This allowed these mischievous bankers (substitute the ‘b’ for a ‘w’ if you like) to skew supply and demand in the desired direction during the window that they set the rate.
So how did this hustle take place? Oh that’s right, a bunch of lads communicated their strategies in electronic chat rooms whilst bonding over sexist and drug-related banter. One of the more prominent chat forums was called ‘The Cartel’. Uh oh. Whilst we can neither confirm nor deny our involvement in the discussions, we can reveal bits and bobs. Following a successful fix by RBS, one participant wrote “we fooking killed it right.” It wasn’t fun and games for all as an HSBC trader posted this after being left out of the cool kids’ chat: “u are uselees…how can I make free money with no fcking heads up.” Peak for you fam.
On 12th November 2014, the Financial Conduct Authority (FCA) enforced a $1.7bn fine for failing to control business practices. Just about getting up from the first hit, the Commodity Futures Trading Commission (CFTC) imposed collective fines of $1.4 billion against the same banks for attempted manipulation of, and for aiding and abetting other banks’ attempts to manipulate global foreign exchange benchmark rates – on the same day. It’s fair to say that the authorities won that round.
The fines appear to be large but are insignificant compared to the overall value of the $5.3 trillion a day forex market; there is no real threat to the long-term profitability of the banks. As we have seen with previous banking scandals (eg Libor), financial penalties only register as a slap on the wrist for these powerhouses.
Authorities are finally acting more like Roy Keane and less like Roy Hodgson in their approach. The FCA has launched innovative remedial programmes aimed at repairing trust in the banking system and the wider market. Banks are now required to review their IT systems in relation to their spot-fixing as the banks currently rely on legacy technologies that allow for the existence of dark-data silos within which manipulation occurs without notice.
The nation’s darling, George Osborne (move over Cheryl), has promised funding for further criminal investigation into rigging by the Serious Fraud Office, and reforms are expected to be swiftly introduced to ensure greater transparency, more responsibility on firms and more defined sanctions to be pushed down should similar occur.
In other fields, disingenuous firms face the loss of their licence to operate; employees face prospect of dismissal. These money manipulators need to be more accountable.
By Kamran Khan