Banks fined over foreign exchange rigging; Greek default fears grow - as it happened
Regulators announce penalties against Barclays, JP Morgan, Citigroup, Royal Bank of Scotland, UBS and Bank of America Merrill Lynch for manipulating the foreign exchange markets
- Latest: Greek and German leaders to discuss crisis in Riga
- Summary: Bad day for reputation of the banks
- Banks fined $5.7bn
- Biggest ever UK fine for Barclays
- Earlier: Growing fears of Greek capital controls
7.08pm BST
A late newsflash: The European Central Bank has reportedly decided to increase the emergency liquidity it provides offer to Greece, but only by a200m.
That takes the ELA limit to a80.2bn.
European Central Bank raises emergency funding cap for Greek banks by a200M to a80.2B - DJ
6.35pm BST
And finally, some important news from Greece as it strives to reach a deal with its creditors.
"We know that decisive decisions ultimately are taken at the level of finance ministers in the Euro Group but at this critical moment a meeting between Tsipras and Merkel can only be helpful."
"It is not a question of red lines or the eurozone. It boils down to what everybody has understood in the last five years which is that the regime of austerity has failed.
The persistence of the architects of this regime and their insistence of keeping the country on the same track, is simply irrational. We want to stop the vicious cycle of debt and recession. It's not about stubbornness. It's about preserving Greece and its people."
6.24pm BST
Time for a recap:
"The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct. It is 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,"
We strongly condemn the actions of those responsible and regret the control failings that allowed such misconduct to take place.
UBS salesmen used elaborate internal system, involving hand signals and "hoots," to trick their customers. pic.twitter.com/2OL8uxMlTs
Related: Banks hit by record $5.7bn fine for rigging forex markets
Related: What is forex and why does it matter?
5.58pm BST
Despite the concerns about bank culture voiced today, several top bank executives have been playing the "bad apple" defence.
"The conduct of a small number of employees was unacceptable and we have taken appropriate disciplinary actions," UBS Chief Executive Officer Sergio Ermotti and Chairman Axel Weber said in a statement.
JPMorgan said in a statement that the conduct underlying the antitrust charge against the bank is "principally attributable" to a single trader, who has since been dismissed.
Bank CEOs say all that currency rigging was just the work of a few bad apples. http://t.co/lRwPtmwTgI via @ZekeFaux and @maxabelson
5.42pm BST
Here's a handy breakdown of all today's fines, and the previous ones announced last November, from Sky News analyst Guy Harding:
FX fines. The definitive list. Today's fines shaded green. #forexscandal pic.twitter.com/6OD50jNxBx
5.35pm BST
Chris Leslie MP, Labour's Shadow Chancellor, is alarmed that bank staff were conspiring to fix foreign exchange rates as late as 2013.
"Surely the time has come for fundamental reform and tougher penalties for banking misconduct.
"If ever there was an example of appalling collusion between bankers putting their own interests ahead of customers, then this is it.
5.22pm BST
Benjamin M. Lawsky, the US Superintendent of Financial Services at the New York State Department (NYDFS), has issued a truly damning report into Barclays.
It explains how the bank conspired with rivals to trigger its clients stop-loss orders, in a "Heads I Win, Tails You Lose" approach to FX trading.
Put simply, Barclays employees helped rig the foreign exchange market.
Without the active cooperation and coordination among the traders at multiple banks, via the use of chat rooms, the Barclays trader would have had neither the information to indicate that pushing the price was feasible, since there were not large contrary orders pending, nor the tools to attempt to accomplish that forced, temporary push lower.
5.00pm BST
David Hillman, spokesperson for the Robin Hood Tax campaign, argues that today's "colossal" fines may not be enough to stamp out bad behaviour:
"It's clear our softly softly approach to the finance industry isn't working. Fines alone are not enough - much bolder action is needed to ensure banks work in our greater interest."
4.49pm BST
The London stock market just closed, with Barclays sitting proudly as the second-biggest riser on the FTSE 100 index, up almost 3.5%.
That means Barclays is worth 1.5bn more than this time yesterday, or almost exactly its total fines.
Barclays market cap up 3.4% or 1.5bn ( 1,482,099,765 ) as 1.5bn fine comes in below what was expected / provided for, which was 2.05bn
4.41pm BST
Another bank has been fined today too -- Bank of America Merrill Lynch.
BAML has been hit with a $205m penalty by the Federal Reserve for "unsafe and unsound practices in the foreign-exchange market".
4.35pm BST
The City must embrace a major cultural shift to avoid a repeat of the FX scandal, argues professor Mark Taylor, Dean of Warwick Business School.
Imposing heavy penalties - together with the accompanying adverse publicity - is one way of shifting that culture.
"This sort of practice strikes at the heart of business ethics and is yet another blow to the integrity of the banks. Our pension funds invest billions of pounds in the financial markets and if they are being cheated in this way it affects every one of us.
"Regulation of the forex markets would be very difficult, but one solution would be to take away the temptation to do this by taking the average over an hour - so 30 minutes either side of 4pm fix rather than 30 seconds. It's a simple, workable solution because it would be a lot harder, if not impossible, to move a market as big as the FX market for an hour. Removing the incentive is much better than regulation because of the global, decentralised nature of the foreign exchange market."
4.25pm BST
Cornell Law professor Robert Hockett says it's significant that the banks have admitted guilt in criminal, not merely regulatory, investigations.
These are the first admissions of criminal guilt by large banking concerns in many, many years.
And with similar investigations into benchmark interest rate and precious metal price manipulation schemes still underway, there are likely to be more such to come.
4.23pm BST
Six banks get fined $6bn for fiddling exchange rates. Their shares go up $6.5bn as a result. So there's that.
4.21pm BST
Shares in Barclays and UBS +3%, RBS +2% today. Markets clearly rattled and chastened by the FX rigging fines pic.twitter.com/pX2V0pKtey
4.20pm BST
Today's case also confirms that some traders knew very well in 2008 that the Libor rate (not to be confused with today's FX fines) was being manipulated.
Here's a snippet from its settlement with UBS, showing one newbie being brought up to speed by an old hand:
4.07pm BST
This really is shocking -- UBS staff were making gestures between each other to mark up the prices that they offered customers, in the hope of making illicit profits.
UBS salesmen used elaborate internal system, involving hand signals and "hoots," to trick their customers. pic.twitter.com/2OL8uxMlTs
4.05pm BST
Wall Street is also taking today's fines in its stride:
Stock prices of today's punished banks either rose or were basically flat. http://t.co/OA3lNIPcmx pic.twitter.com/jgoa9rPClC
4.02pm BST
Here's the press release from the Department of Justice:
The charged conspiracy fixed the U.S. dollar - euro exchange rate, affecting currencies that are at the heart of international commerce and undermining the integrity and the competitiveness of foreign currency exchange markets which account for hundreds of billions of dollars worth of transactions every day.
"The seriousness of the crime warrants the parent-level guilty pleas by Citicorp, Barclays, JPMorgan and RBS."
3.58pm BST
Lynch: Banks showed "Breathtaking flagrancy" Er. Yer. http://t.co/zj6dtBkwgJ pic.twitter.com/ZGpVbQ4QSc
3.57pm BST
US attorney general Loretta Lynch has said the banks were guilty of "breathtaking flagrancy", at a press conference taking place now.
Lynch said the Department of Justice was still investigating the cartel and declined to comment on whether individuals would eventually be charged.
3.54pm BST
Today's fines are proof that the City is being regulated properly, according to The Treasury.
A spokesman says:
"The integrity of the City matters to the economy of Britain, which is why the government took action to deal with the abuses and unacceptable behaviour by implementing the key recommendations of the Parliamentary Commission on Banking Standards and setting up the Fair and Effective Markets Review, to ensure that Britain's financial markets are working as they should and similar scandals cannot happen again."
3.50pm BST
Shares in Royal Bank of Scotland have risen by 2%. It says that today's fines are fully covered in existing provisions.
So, like Barclays, there is relief that the penalties aren't worse.
3.44pm BST
Barclays' share price has jumped by 3%!
That's not the reaction you might expect, given the bank has been fined a record 284m by UK regulators and chastised over its failings.
BARC Fined 1.534m but already made provisions of 2.05bn. 500m write-back for Q2?
3.40pm BST
The FX market is huge, with over $5 trillion of currency deals taking place each day.
And today's evidence shows that traders didn't always succeed in rigging the rate at which currencies were changing hands.
I. Love. Transcripts. http://t.co/30y6nCZm49 #fooooooooooookkkkk pic.twitter.com/C5Z5nDJAHY
3.33pm BST
This is the second time that regulators have announced fines over the Forex-rigging scandal. They take the total penalties up to $10bn.
A big number, but one that is dwarfed by the profits of the banks involved:
Total fines for 7 banks in global FX scandal = $10 bln Total net profit of those 7 banks from 2013 to now = $132 bln
3.31pm BST
Royal Bank of Scotland has dismissed three employees, and suspended two more, following its role in the manipulation of the foreign exchange markets.
Philip Hampton, chairman of the bank - bailed out by the UK taxpayer in 2009 - says it fully accepts today's penalties.
We strongly condemn the actions of those responsible and regret the control failings that allowed such misconduct to take place.
"This episode has exposed serious shortcomings at both individual and collective levels from which we continue to learn. As part of this effort we are committed to implementing further improvements to systems and controls.
3.21pm BST
As well as fining Barclays a record 284m, the FCA is damning about the conduct of the traders who rigged the foreign exchange rates.
It says they formed secret groups with names such as "The Three Musketeers" -- and actually tried to trigger their clients' own stop-loss orders; costing their clients money, but making money for the traders.
Barclays engaged in collusive behaviour in which traders from different banks, including Barclays, formed tight knit groups and communicated through electronic messaging systems including chat rooms. Certain groups described themselves or were described by others using phrases such as"the players" - one chat room participant referred to himself and others in the chat room as "the 3 musketeers" and commented "we all die together".
The information obtained through these groups helped traders determine their trading strategies. They then attempted to manipulate fix rates and trigger client "stop loss" orders (which are designed to limit the losses a client could face if exposed to adverse currency rate movements).
3.18pm BST
Today's fines include the biggest ever penalty imposed by Britain's financial watchdog, 284m, against Barclays.
"This is another example of a firm allowing unacceptable practices to flourish on the trading floor. Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm's interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system.
Firms should scrutinise their own systems and cultures to ensure that they make good on their promises to deliver change."
3.05pm BST
BREAKING: Barclays, JP Morgan, Citigroup, Royal Bank of Scotland and UBS have been fined a total of $5.7bn for their role in manipulating the foreign exchange markets.
Barclays will also fire eight people, as part of a deal with regulators.
2.59pm BST
Our City editor, Jill Treanor, has helpfully written a Q&A about the forex scandal, to help explain today's fines.
And here it is:
2.56pm BST
OK. Financial regulators are about to announce fines against some of the world's largest banks, over their role in the foreign exchange-rigging scandal.
We believe thats several banks will be penalised, with fines possibly running to 3bn. They could also plead guilty to offences relating to manipulating foreign exchange markets.
So, roughly one hour to go before we get the latest installment of "dumb things traders said on chat" #fx
2.46pm BST
Time for a recap of the main Greek developments today.
Concern is growing that Greece will miss its next repayment to the International Monetary Fund, triggering a new phase of the crisis.
Euro slides as Greek spokesman warns June 5 will be "the moment of truth" http://t.co/MbynMbkYw5 pic.twitter.com/z1ari6WWP8" #morningjoe #tcot
#Greece's c-bank to ask #ECB for increase of 1.1 bln euro to emergency funding it can provide to banks @business says http://t.co/mKqNxdZunq
Related: Euro under pressure after Greece warns it could fail to meet IMF repayment
2.12pm BST
A group of protesters have broken into the Athens headquarters of Allianz, the German financial services group, according to Greek newspaper Enikos.
They say:
According to reports the demonstrators, without using violence, asked all employees to leave the building.
Leftists occupy #Allianz's #Athens headquarters Greece- http://t.co/G3moin8uEl pic.twitter.com/lXvVW2mH1B
1.51pm BST
Health workers have now marched through Athens, to mark a 24-hour strike calling for more funding and extra staff for the sector.
1.28pm BST
Over in Athens, the speaker of the Greek parliament has gone toe-to-toe with police officers, insisting they stop restricting today's anti-austerity protesters [see earlier photos]
#Syriza House Speaker Konstantopoulou demanding from the police to open the road for marching of protesters. #Greece https://t.co/J3WLJGEXua
1.26pm BST
Greece would enter a legal minefield if it were to default on its IMF repayments, as it is now threatening.
Benedict James, a partner at law firm Linklaters, explains:
"With a number of repayment deadlines for Greece in the coming weeks, if a bailout package isn't agreed, the government seems likely to run progressively out of euros. This may lead to the imposition of capital controls and issuance of government IOUs as a sort of quasi-currency (as happened in Argentina and California).
That may or may not be a precursor to a full exit of the euro.
12.56pm BST
When we profiled Yanis Varoufakis in February, Greece's new finance minister told us that "If I weren't scared, I'd be awfully dangerous."
Today's NYT profile shows that he's now even more worried about the situation.
12.38pm BST
Reuters is reporting that Greece has suggested bringing in a transaction tax on bank customers:
12.33pm BST
The New York Times has just published a profile of Yanis Varoufakis today, which gives a detailed, sympathetic picture of the challenges facing Greece's finance minister.
I think it's appearing in next Saturday's NYT magazine; but we can read it now.
Imagine that President Obama had, instead of picking Timothy Geithner to be his Treasury secretary in the midst of the financial crisis, appointed a progressive academic economist like Paul Krugman or Joseph Stiglitz, only edgier and funnier, someone who had spoken out scathingly against bank bailouts, freely expressing himself however he wanted on television and in public debates because he wasn't running for office....
NYT: Tsipras' appointing Varoufakis as a Greek Finance Minister is like Obama appointing Stiglitz or Krugman. http://t.co/Nv5vGWEJc5
The Greek finance minister had just returned to Athens from a hopscotch tour of European capitals, during which he warned his fellow European leaders that they faced a Continental crisis: If they didn't lend money to his ailing country soon, Greece might end up forced to leave the eurozone. And yet Greece wouldn't accept many of the conditions they were demanding in return. He sounded angry. "I'll be damned if I will accept another package of economic policies that perpetuate this same crisis. This is not what I was elected for."
He would resign, he said, rather than push the Greek people deeper into economic despair: "It's not good for Europe, and it's not good for Greece."
From the European point of view, Greece has no right at all to argue about reforms, so utterly did previous governments, after torpedoing their own economy, fail to implement them over the past five years. But Varoufakis and Syriza regard their election as a sort of "Day Zero" for Greece. "We are the guys who spent all our lives in Syntagma Square outside my office protesting what the people inside my office were doing," Varoufakis said. "We were being bombarded with gas, because we didn't see how we could repay a loan under the circumstances."
He compared himself to Margaret Thatcher, elected in 1979 in opposition to the welfare state. "How intelligent is it to blame Margaret Thatcher for the postwar corporatism that came before her?" he asked. "Not much. So what we have here is a serious case of deeply rooted racism that all Greeks are the same, that whether or not they protested the bailout, they are still responsible for it."
11.53am BST
Over in Athens there is mounting speculation that prime minister Alexis Tsipras is struggling to control his increasingly fractious far left Syriza party.
"The party can't have its feet in two boats."
"The big question is can Tsipras strike a deal inside his own party when so many are now speaking openly about the benefits of going back to the drachma? Personally, I seriously doubt that they can find an internal, workable compromise."
"An agreement with the "institutions will either comply with the government's programme or it can't happen, and it that case it won't happen."
11.37am BST
The risk of Greece freezing bank accounts and imposing restrictions on the movement of money has "materially increased" in the last few weeks, rating agency Moody's has just warned.
The outlook for the Greek banking system is negative, primarily reflecting the acute deterioration in Greek banks' funding and liquidity, says Moody's Investors Service in a new report published recently.
These pressures are unlikely to ease over the next 12-18 months and there is a high likelihood of an imposition of capital controls and a deposit freeze.
Moody's notes that significant deposit outflows of more than a30 billion since December 2014 have increased banks' dependence on central bank funding. In our view, the banks are likely to remain highly dependent on central bank funding, as ongoing uncertainty regarding Greece's support programme continues to compromise depositors' confidence.
*MOODY'S: PRESSURES ON GREEK BANKING UNLIKELY TO EASE 12-18 MOS
11.11am BST
Greek finance minister Yanis Varoufakis has now published a transcript of his interview with Die Zeit (see earlier post).
It shows Varoufakis described Wolfgang Schauble as a "legendary" figure...although one whose view of the crisis should be challenged.
YV: I would tell my daughter that it is, from my perspective, a multi-layered relationship. There is a sense of awe that I feel from meeting with a legendary figure whose work I have been following critically for decades. Then there is a strong urge to counter his overarching approach to common problems regarding Europe. Additionally, there is some frustration at not having the opportunity to discuss in a different setting; to stage these meetings in a proper federal, democratic context in which arguments, rather than relative power, would play a more prominent role.
YV: That Europe needs a political union and that, without it, our monetary union is problematic.
YV: Yes I do (as I am sure he thinks that I err in my analysis). Primarily, he associates past Greek governments with the Greek people; as if the former reflect the character of the latter. And he does not appreciate how helpful it would be for mainstream Northern Europe to find a modus vivendi with a movement (like SYRIZA in Greece) which may be very critical of European institutions but which is profoundly pro-European and eager to help bring Europe closer together.
My answers (verbatim) to Die Zeit on Dr Schiuble http://t.co/l4kOBFGqhT
11.06am BST
Investors just paid for the privilege of lending money to Portugal, suggesting investors aren't panicking about an anti-austerity government winning power this autumn.
The Lisbon debt agency just sold a300m of six-month Treasury bills at an average yield of -.002%.
Portugal joining the party. *PORTUGAL SELLS 6-MONTH BILLS AT NEGATIVE YIELD FOR 1ST TIME
Portugal sells 6 month T-Bills at a negative yield. Is this the same Portugal that might be electing an anti austerity gov't in October?
10.38am BST
In another sign of rising tensions, Greek pensioners are holding an anti-austerity protest in Athens, against cuts to welfare and healthcare.
The demonstration, which looks peaceful, could be a taste of what's to come if Greece is forced to implement more cutbacks by its lenders.
10.21am BST
Greek finance minister Yanis Varoufakis has apparently told a German newspaper that his counterpart, Wolfgang Schiuble, makes mistakes in his analysis of Greece.
The left-wing economist, asked by Die Zeit in excerpts of an interview to be published on Thursday whether the conservative finance German minister commits such mistakes, answered: "Yes, he does."
"It is frustrating that we are not able to speak with each other in a context where arguments count more than relative power."
In case a Greek deal wasn't hard enough @yanisvaroufakis gives interview: *SCHAEUBLE'S ANALYSIS OF GREECE IS FLAWED, VAROUFAKIS TELLS ZEIT
This @yanisvaroufakis interview with Die Zeit is something else. Quite personal. *VAROUFAKIS SAYS SCHAEUBLE EMPHASIZING POWER OVER ARGUMENT:
10.14am BST
A second Greek government representative has now declared that Athens will miss its a305m repayment to the IMF early next month, unless a deal is reached.
Thanassis Petrakos, Syriza's parliamentary spokesman, echoed Nikos Filis's comments this morning, on Star TV.
Both parliamentary spokesmen of #Syriza, Filis & Petrakos, repeated this morning (different shows) that govt might actually not pay IMF.
#Syriza spox Petrakos replies: "What can happen to us [if we don't pay the IMF]? Nothing is going to happen to us!" #Greece
These. People. Are. Dangerously. Foolish. #Greece
9.41am BST
Britain's central bank can't agree whether wage are going to rise strongly, or not.
This is the key bit of the MPC minutes. Pay growth & inflation might pick up quickly... Or they might not... pic.twitter.com/8FyR96ZeQW
9.39am BST
The Bank of England also believes UK economic growth will accelerate this quarter, after slowing to just 0.3% in the first three months of 2015.
The Committee judged that GDP growth would pick up in Q2 to close to its historical average rate, supported by the boost to real incomes from the fall in food, energy and other import prices, and would continue to grow at, or just a little below, historical average rates throughout the forecast period.
9.37am BST
The Bank of England's monetary policy committee was unanimous in voting to leave interest rates unchanged this month, according to the minutes of the meeting which were just released.
However, the decision of whether to hold or raise Bank Rate was "finely balanced" for two MPC members.
While there was a range of views over the most likely future path for Bank Rate, all members agreed that it was more likely than not that Bank Rate would rise over the three-year forecast period.
Minutes of the MPC Meeting held on 7 and 8 May http://t.co/23rf87VcTR
9.16am BST
Europe's stock markets are rather becalmed this morning, as the Greek crisis continues to worry traders.
Most of the major indices are slightly in the red:
Unfortunately Greece remained a thorn with no positive developments and reduced expectations of a swift solution.
9.00am BST
We're making progress with Greece, but we're not there yet.
8.41am BST
Greece's governing Syriza party has called a rally in Paris tonight, to show support for Athens in its battle with its creditors.
The event, at 18:30 in Republic Square, will call on Greece's lenders to respect its "red lines"; the promises on pensions and labour market reforms, ahead of an EU summit tomorrow in Riga, Latvia.
SYRIZA calls for a "Avec les Grecs" (together with Greeks) rally today in Paris, #France in place de la Ri(C)publique. http://t.co/ts36jIYoOS
It seems that SYRIZA is trying to re-ignite people's support across Europe in head of the #eurogroup negotiation #greece #previoustweet
8.28am BST
Investors are bracing for Greece to miss its a305m repayment to the IMF on June 5, says Mike van Dulken of Accendo Markets.
In Europe this morning indications are that, while there has been progress in negotiations, Greece will miss its June debt payment to the IMF unless a deal is reached by the end of May.
Concessions for Greece are highly unlikely - the EU will almost certainly face a second revolt in the form of Portugal's ascendant socialists if any are afforded to Athens.
8.20am BST
The foreign-exchange rigging scandal took another twist this morning.
Swiss bank UBS revealed it had dodged being prosecuted by the US Department of Justice...because it blew the whistle that traders had been conspiring to fix the rates at which currencies were changing hands.
The announcement from UBS signals that the US DoJ is preparing to impose punishments on other banks - including Barclays and bailed-out Royal Bank of Scotland - as soon as Wednesday. Barclays is also awaiting punishment from the FCA and has already prepared the ground for penalties of as much as 2bn.
The punishments, also expected on two US banks, could result in total penalties of over 3bn and require the banks to plead guilty to offences relating to manipulating foreign exchange markets - a sanction rarely imposed by the DoJ
Related: UBS facing 350m in fines as banks hit with fresh sanctions for forex rigging
8.09am BST
The euro fell sharply following the warning that Greece could miss its repayment to the IMF on June 5.
It hit a two week low against the US dollar at $1.107.
8.03am BST
Greece will prioritise pensions and wages rather than repaying the IMF, if creditors don't unlock some of the a7.2bn in outstanding bailout funds, added Nikos Filis.
"There is no money for the foreign (lenders) when they have not given us any funds for a year...We don't have it to make the payment and this is part of the discussion."
7.54am BST
The Greek government has warned that it will miss its next repayment to the International Monetary Fund unless a deal is reached soon.
Nikos Filis, the government's parliamentary speaker, raised the stakes in its negotiations with its lenders this morning.
"Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5.
"If there is no deal by then that will address the current funding problem, they won't get any money."
GREECE WILL NOT MAKE JUNE 5 IMF LOAN REPAYMENT IF NO DEAL WITH LENDERS IS REACHED BY THEN- GOVT PARLIAMENTARY SPEAKER - RTRS
7.52am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It is possible that two thirds of the council will support the move as soon as the Wednesday vote.
The haircuts were lowered last year after Greece returned to capital markets. The council is considering returning to the levels applied before the reduction, according to two people familiar with the matter.
ECB ensnared in politics as it faces vote on Bank of Greece loans: http://t.co/PH8k3ORqmS #FT
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