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Big Banks Fined €344m for ‘Sterling Lads’ Forex Trading

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The European Commission has fined five major European banks a total of €344m as part of a long-running investigation into the foreign exchange (Forex) spot trading market. 

The Commission’s investigation focused on the trading of G10 currencies – the most liquid and traded currencies worldwide – by a group of traders on behalf of UK-based banks Barclays, RBS (now NatWest), and HSBC, and Swiss banks UBS and Credit Suisse.

“The collusive behavior of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers,” Margrethe Vestager, Executive Vice-President in charge of competition policy, said.

The fines were related to the actions of a cartel of traders from the five banks. Between May 2011 and July 2012 they exchanged sensitive information and trading plans in an online chatroom called ‘Sterling Lads’ and occasionally coordinated their trading strategies. 

These exchanges enabled them to make informed market decisions on whether and when to sell or buy the currencies they had in their portfolios. It also helped identify opportunities for coordination, for example through a practice called “standing down”, where some would temporarily stop trading to avoid interfering with another trader.

Swiss bank UBS exposed the existence of the cartel, and as a result, avoided a multi-million Euro fine. The three UK banks cooperated with the investigation and received reduced fines – HSBC was fined €174.3m, Barclays €54.3m, and RBS €32.5m.

“Our culture and controls have changed fundamentally during the past 10 years and this kind of behavior has no place at the bank we are today,” a NatWest spokesman said in response to the penalty.

Credit Suisse, which previously denied that its employees engaged in any misconduct in currency markets that violated EU competition rules, was fined €83m.

The ‘Sterling Lads’ investigation is the third in a series of inquiries by the Commission into Forex, two of which concluded in 2019, and the 37th decision since the settlement procedure for cartels was introduced in June 2008. 

An €811.2m  Forex (Three-Way Banana Splitsettlement related to communications in three different, consecutive chat rooms (Three-way banana split /Two and a half me / Only Marge) among traders from UBS, Barclays, RBS, Citigroup, and JPMorgan, between 2007 and 2013.

A €257.7m Forex (Essex Express) settlement decision concerned communications in two chatrooms (Essex Express ‘n the Jimmy and Semi Grumpy Old Men) among traders from UBS, Barclays, RBS, and Bank of Tokyo-Mitsubishi (now MUFG Bank), between 2009 and 2012.

The fines were based on the Commission’s 2006 Guidelines on fines. In line with other cases, firms that are transparent have seen their fines reduced or even waived. 

Under the Commission’s 2006 Leniency Notice, UBS received full immunity for revealing the existence of the cartels, avoiding an aggregate fine of around €94m. Barclays, RBS, and HSBC also benefited from reductions ranging from 15% to 50% under the Leniency Notice and a 10% reduction under the 2008 Settlement Notice for cooperating with the investigation. 

These cases highlight the need for trade surveillance teams to assess and understand their firm’s antitrust risks. These risks will differ depending on the size and nature of the activity of the firm and should be reviewed on an ongoing basis. Regular training for relevant staff is critical, alongside comprehensive risk and control policies. An investigation protocol should be in place to document and handle any breaches. 

As more staff continue to work from home, keeping procedures to monitor work devices up-to-date is also important. For example, unusual patterns of trading, particularly out of regular hours, can signal risk. Keyword scanning of communications on work devices is another key tool, so firms should ensure they’re regularly updating the list of words they’re checking for. 

Originally published December 10, 2021, updated May 6, 2022

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