The world’s biggest banks had been steeling themselves for months before the US Department of Justice’s rulings on manipulation in the foreign exchange markets. Last week’s announcement was if anything less tough than expected – £3.7bn of fines were levied on top of those announced last autumn – to bring the grand total to an astounding £6.3bn.
Crucially the banks also admitted that what they had done was criminal. The US attorney general Loretta Lynch – declared that foreign exchange traders had exhibited ‘breathtaking flagrancy’ in setting up a group they called ‘the cartel’ to manipulate the market between 2007 and the end of 2013. The fine was ‘commensurate with the pervasive harm done. And it should deter competitors in the future from chasing profits without regard to fairness to the law – or to the public welfare’.
Put bluntly – the world’s most prestigious banks had brazenly and systematically ripped off their clients. It was the crime of the decade. Yet the markets had been expecting worse.
Only a month ago Deutsche Bank had paid a record £1.6bn fine for manipulating and rigging prices in the currency and money markets. If this was the benchmark – thought the markets – the fines for other banks would be higher. As it was £3.7bn seemed almost modest – and the share prices of Barclays – RBS – Citigroup – and JP Morgan rose sharply in relief.
The hope in the banking world is that the worst may be over.