Federal Reserve Imposes Record Fines on Six Major Banks for FX Market Misconduct

The Federal Reserve on Wednesday levied fines totaling more than $1.8 billion against six major banking organizations for engaging in unsafe and unsound practices in the foreign exchange (FX) markets. The banks include UBS AG, Barclays Bank PLC, Citigroup Inc., JPMorgan Chase & Co., Royal Bank of Scotland PLC (RBS), and Bank of America Corporation. The fines were the largest ever assessed by the Federal Reserve, with each bank receiving a penalty ranging from $205 million to $342 million. The Federal Reserve also issued cease and desist orders requiring the banks to improve their policies and procedures for oversight and controls over activities in the wholesale FX and similar markets.

Key Takeaways:

• Six major banking organizations, including UBS AG, Barclays Bank PLC, Citigroup Inc., JPMorgan Chase & Co., Royal Bank of Scotland PLC (RBS), and Bank of America Corporation, were fined a total of $1.8 billion by the Federal Reserve for engaging in unsafe and unsound practices in the FX markets.
• The banks failed to detect and address improper actions by their traders, including the disclosure of confidential customer information and illegal agreements to manipulate benchmark currency prices.
• Bank of America failed to detect and address conduct by traders who discussed the possibility of entering into agreements to manipulate prices.
• The Federal Reserve required the banks to improve their senior management oversight, internal controls, risk management, and internal audit policies and procedures for their FX activities.
• The banks were also required to cooperate in the Federal Reserve's investigation of individuals involved in the conduct underlying the enforcement actions.
• Four of the banks were required to improve controls over their sales practices.

Statistics:

• Total fines imposed: $1.8 billion
• Largest fine: $342 million (UBS AG, Barclays Bank PLC, Citigroup Inc., JPMorgan Chase & Co.)
• Smallest fine: $205 million (Bank of America Corporation)
• Number of banks fined: 6
• Type of misconduct: Foreign exchange (FX) market misconduct
• Location of misconduct: Wholesale FX and similar markets
• Scope of required improvements: Senior management oversight, internal controls, risk management, internal audit policies and procedures

Sources:

• [Federal Reserve Enforcement Action, 2023]