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Market Update

U.S. Regulators Show Weakness in Charging Five Banks with Billions in Fines

Author: Devan Biswas
Last Update: 2:16 PM ET May 20 2015

Five Banks Agreed to Pay $5.8 Billion to U.S. Fines

Five banks in the U.S. and U.K. were charged with multiple crimes linked to foreign currencies and interest rates violations by state and federal authorities on Wednesday.

The fines totaled more than $5 billion, but many analysts believe that banks got off cheap considering the enormity of violations.

The currency market trades daily $5 trillion and is one of the least regulated markets, prosecutors said today.

The rate ‘rigging’ was done nearly every day for five years to 2012 as traders will agree to a price for buy and sale in advance at the expense of customers.

What is different about these charges is that the current violations are pinned down to the parent companies unlike previous violations which were linked to the banking subsidiaries or smaller divisions at the large banks.

In a sharply worded but standard warning issued by regulators failed to win many critics of the Department of Justice and the prearranged deal with the SEC only added to the skepticism on Main Street.

“This Department of Justice intends to prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers,” Attorney General Loretta E. Lynch said today in Washington, D.C.

The banks are granted “waivers” from the Securities and Exchange Commission that will permit them from managing mutual funds or pension plans or offer securities brokerage services despite the recent charges and previous fines announced in November.

Citicorp, JP Morgan Chase, Barclays and Royal Bank of Scotland agreed to settlements with the U.S. Department of Justice in Washington linked to currency rate manipulation charges.

According to the settlements, Citicorp parent Citigroup Inc agreed to pay $1.2 billion including $925 million for anti-trust violations. JP Morgan agreed to pay $900 million and RBS agreed to $660 million in fines.

Barclays agreed to pay a total of $2.4 billion in charges when counted the fines paid to the Financial Conduct Authority of London, U.K.

UBS, the Swiss bank agreed to pay $203 million and pleaded to a lesser wire fraud charge and was granted immunity in the currency probe and was the first to cooperate with antitrust investigators.

However, the Swiss bank agreed to a total charge of more than $500 million and nearly half of these are stemming from the previous Libor rate manipulation charges.

The current list of charges are in addition to $4.25 billion in fines and charges announced in November to settle foreign exchange investigation by a group of regulators.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc