Mega Banks Are Fined for Foreign Exchange Rigging – Now It’s Back To “Business as Usual”

Far from chastening the world’s biggest currency trading firms, the multi-billion dollar fines levied by regulators on Wednesday are more likely to draw a line under the affair and gradually allow a return to business as usual.

A year into a wide-ranging industry probe into charges that banks routinely fleeced clients over currencies, industry observers and politicians were frustrated by a deal they said showed the affair will end just with fines rather than any reform of what they say is the Wild West of financial markets.

– From the Reuters article: Banks pay up and carry on after FX fines

While many readers will have likely already heard about the latest slap on the wrist fine received by the mega banks with regard to FX rigging (which will only encourage more criminality), there are two reasons I want to add my two cents on the topic.

First, it’s an incredible admission of the level of lawlessness that society is willing to put up with, that Reuters so matter-of-factly admits that absolutely nothing will change despite mega banks once again being caught in extraordinarily unethical behavior.

Second, I want to point out that the article also admits the mega banks are essentially allowed to self-regualte in this market and will continue to do so. This is basically the Mike Bloomberg philosophy, which I highlighted earlier today in the post: Ex-NYC Mayor Mike Bloomberg on Dodd-Frank: “The Government Should Have Let the Industry Craft the Bill.” Here’s an excerpt:

The Dodd-Frank regulations put in place after the financial crisis are “stupid laws” that the banking industry will just ignore anyway — just like Mayor Bill de Blasio’s new 25-mile-per-hour speed limit, the financial data company CEO and former New York City mayor said on Monday.

“The world adjusts to stupid laws,” he said at an industry conference. “They just don’t pay attention to it and you get burned later on. That really is what happens, like a 25-mile-an-hour speed limit.”

Instead, the government should have let the industry craft the bill and let Congress “tweak a little bit,” he said.

The very same day, we learn from Reuters that this is exactly the way “regulation” is being handled:

LONDON, Nov 12 (Reuters) – Far from chastening the world’s biggest currency trading firms, the multi-billion dollar fines levied by regulators on Wednesday are more likely to draw a line under the affair and gradually allow a return to business as usual.

A year into a wide-ranging industry probe into charges that banks routinely fleeced clients over currencies, industry observers and politicians were frustrated by a deal they said showed the affair will end just with fines rather than any reform of what they say is the Wild West of financial markets.

But in essence, Wednesday’s rulings put the foreign exchange market, long “self-regulated” by banks and people who provide services to banks, well on the way to seeing off any risk of a new era of overarching global regulation.

“It seems to be business as usual — banks blow up, pay fines, and we move on. They just seem to be inventing new ways to break the rules,” said Mark Garnier, a former City financier and Conservative member of the UK parliamentary committee charged with overseeing finance.

They have fallen over themselves to play ball with the regulators and, given the complicated technical and financial nature of the probe, lawyers and consultants employed by banks have done much of the actual investigative work.

“The banks have been allowed to investigate themselves,” one source familiar with the investigation told Reuters. “The investigated decide what they want to investigate, what they admit to, and how much they will pay.”

Meanwhile, Bloomberg (the media outlet) provided some snippets from the crooked traders’ chatrooms. Here are a few:

Traders worked together to “whack” the market, called themselves a “cartell” and congratulated each other for a job well done, according to transcripts released by regulators today.

“Ok, i got a lot of euros,” a currency trader at JPMorgan Chase & Co. said in an undated 3:51 p.m. message to his counterpart at Citigroup Inc. A minute later he says, “tell you what, lets double team it.” 

In another excerpt, traders at Citigroup, JPMorgan, and UBS debate whether to invite a fourth into a private chat room. “Are we ok with keeping this as is .. ie the info lvls & risk sharing?” the UBS trader asks at 7:49 a.m.

A minute later the JPMorgan trader tries to ensure that the new member puts the interests of the group first. “You know him — will he tell rest of desk stuff — or god forbin his nyk…” referring to New York colleagues.

The Citigroup trader then chimes in, “yes — that’s really imp[ortant] q[uestion] — dont want other numpty’s in mkt to know,” according to the transcripts, which added the wording clarification.

“But not only that,” the trader added. “Is he gonna protect us like we protect each other against our own branches?”

You can’t make this stuff up.

No jail sentences, no reduction in criminality. This isn’t rocket science.

In Liberty,
Michael Krieger

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