Banks in the News Again
Banks are in the news again but for all the wrong reasons. According to a Bloomberg story regulators in Switzerland, the US and Britain are imposing fines of about 4.3 billion on 6 major banks. The fines are for the rigging of key benchmarks related to the foreign exchange market last year. (Source: Bloomberg 11/12/14)
According to Bloomberg, banks and individuals could still face another round of penalties. The investigation involves allegations that dealers at the biggest banks colluded with other firms to rig benchmarks that determine foreign exchange rates.
The story reports that CitiGroup and JPMorgan will pay about 1 Billion each in fines to three regulatory agencies. The two banks are major players in the currency trading market. The other banks said to be involved include HSBC, Royal Bank of Scotland, and UBS. (Source: Bloomberg)
Precious Metals Rigging Probe
On top of all of this, according to a story in FT, UBS is to settle allegations of misconduct at the banks precious metals trading business. The story goes on to say that BaFin, the German Financial Regulator, has launch an investigation into the Gold market and is probing Deutsche Bank. (Source: FT 11/9/14)
In the same week we have stories about settlements in both the foreign exchange markets and the precious metals markets. It does not appear though that banks are admitting any wrong doing. It is interesting that no one in the executive ranks at any of these banks are facing criminal changes.
Banks probably know that they can make more money from the scam than the money they have to pay out in fines. There does not appear to be any incentive for the banks to stop this kind of behavior, especially if no one is ever prosecuted.
Big Banks Dominate the Finance Industry
According to an article in the telegraph, the UK’s biggest 4 banks include Lloyds, HSBC, Barclays and Royal Bank of Scotland. These 4 banks control 77pc of active personal current accounts, 85pc of business current accounts, and 90pc of small business loans. (Source telegraph.co.uk 06 Nov 14)
Given the overall size of the major banks and their influence in the industry, regulators are more than likely reluctant to be too harsh or stringent in enforcement. A major bank failure in Europe or the US would be a huge problem and could even threaten the solvency of the system itself.
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