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At least a dozen authorities across the US, Europe and Asia are assisting in or conducting investigations against more than 15 banks to find evidence that traders have shared information about client orders and tried to move crucial forex benchmarks. The myriad probes into the largest financial market in the world is expected trigger multibillion-dollar bills for fines and civil litigation and has prompted banks as well as regulators to put a vast number of internal and external staff on the case.
Lawyers and bankers say the initiative is likely to rank among the biggest cross-border regulatory efforts ever and could surpass the sprawling probe into the manipulation of Libor and other interbank lending rates.“The mountain is much bigger than in the Libor cases", one senior compliance banker warned. In a boost to an industry of lawyers, consultancy and data mining firms, some bankers and analysts estimate the resources used is adding up to far more than 1,000 people.
The UK’s Financial Conduct Authority alone, which is attempting to play the lead in the global efforts, has in its enforcement division tasked at least 50 people, including external and temporary workers, with the probe. On the industry side, the top 10 banks in forex, including Deutsche Bank, UBS and Royal Bank of Scotland, have assigned far more than 500 people combined to work on the case in their internal probes, according to estimates from several people involved. Analysts estimate that those three bank, as well as Barclays and HSBC, will together have to set aside €8.5 billion - €10.6 billion for litigation costs including fines and penalties in 2014 and 2015, on top of the €16.4 billion those five banks had already set aside for legal costs to the end of 2013.
The forex effort includes regulators and prosecutors from the US to Switzerland and Hong Kong. To cope, the FCA has set up a special team to coordinate with other agencies. “The investigations have prompted unprecedented global cooperation", Matthew Nunan, head of wholesale enforcement at the FCA, told the Financial Times. “There is a high level of mutual respect and understanding between the authorities. The FCA is playing a key role in driving this forward.” After what lawyers have described as bickering during the Libor probe, regulators seem keen to avoid such mistakes with forex. They are seeking to reduce the number of overlapping information requests being fired at firms by various agencies. The probes may stretch well beyond the 2015 timeframe that Martin Wheatley, head of the FCA, has given.
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Chris Cummings, chief executive of finance sector lobby group TheCityUK said that regulators should deal quickly with allegations that banks have rigged the $5.3 trillion-a-day foreign exchange market to avoid harming Britain's reputation as a financial centre. The sooner the allegations are dealt with the better for London, which accounts for 40 per cent of the global currency market. "It's really important that people that have broken the law are subject to the full sanction of the law", Cummings told Reuters on the sidelines of a financial conference.
"The best thing that you can do in these circumstances is that firms fully cooperate with the regulatory authorities and for those authorities to act swiftly. Our reputation as a leading financial centre is built on good business and clean business", Cummings said.