* Return seen to business as usual
* Call for punishments to go beyond fines
* "Wild West" financial markets need reform
By Patrick Graham and Jamie McGeever
LONDON, Nov 12 Far from chastening the world's
biggest currency trading firms, the multi-billion dollar fines
levied by regulators on Wednesday are more likely to draw a line
under the affair and gradually allow a return to business as
A year into a wide-ranging industry probe into charges that
banks routinely fleeced clients over currencies, industry
observers and politicians were frustrated by a deal they said
showed the affair will end just with fines rather than any
reform of what they say is the Wild West of financial markets.
The $4.3 billion in fines handed down on Wednesday are
unprecedented, but do not mark the end of the process;
individuals may yet be prosecuted and time will tell if that
discourages the next generation of traders from doing what they
have always tended to do naturally: put their interests ahead of
their banks, their banks' interest ahead of the client's and the
The U.S. Department of Justice has also yet to report and
has been a heavier hitter than its European peers to date, a
hint that it may yet have the appetite to push for more
But in essence, Wednesday's rulings put the foreign exchange
market, long "self-regulated" by banks and people who provide
services to banks, well on the way to seeing off any risk of a
new era of overarching global regulation.
"It seems to be business as usual -- banks blow up, pay
fines, and we move on. They just seem to be inventing new ways
to break the rules," said Mark Garnier, a former City financier
and Conservative member of the UK parliamentary committee
charged with overseeing finance.
"The fines are meaningless. £400 million or £4 billion.
There's only one fine that's important and that's if they're
being taken out of traders' bonus pool. The individuals and
those around them have to start feeling the pinch as well, not
the banks' shareholders, staff and customers."
Frightened a year ago by the prospect of fines that dwarfed
those handed out in the Libor interest rate rigging scandal and
regulation that might eat into profits from one of their biggest
money-spinners, banks have invested millions in trying to put a
lid on the fixing row.
Industry figures say they have found ready support in a
British political establishment worried over the impact on the
status of London as the world's main currency trading hub,
responsible for an estimated 40 percent of all daily flows.
The strategy, broadly, has been to put the blame on a
handful of rogue "bad apples" who just happened to be ranking
currency traders in each of the industry's dominant players.
They have fallen over themselves to play ball with the
regulators and, given the complicated technical and financial
nature of the probe, lawyers and consultants employed by banks
have done much of the actual investigative work.
"The banks have been allowed to investigate themselves," one
source familiar with the investigation told Reuters. "The
investigated decide what they want to investigate, what they
admit to, and how much they will pay."
The regulator will now ensure that standards for systems and
controls at the other 36 banks in the industry will be
overhauled, with managers attesting that action has been taken,
ensuring individual accountability.
In a process overseen by the G20's regulatory arm, the
Financial Stability Board, banks and investment managers have
agreed to changes including an extension of the window in which
the main fixing benchmarks are measured, a separation of fixing
orders from spot trading and efforts to unify codes of conduct.
But traders have already begun to point to weakness in those
reforms, whose effect they say will be to strengthen the still
growing dominance of Citi, Deutsche Bank and Barclays, and a
handful of others, over the market.
"In the broader picture, it often seems to me like this has
just been a land grab by the regulatory, advisory and legal
profession in banking," one senior dealer told Reuters, speaking
on condition of anonymity.
Industry professionals have argued strongly that there is no
reason to make forex as tightly regulated as stock or derivative
markets -- by putting trading on exchanges for example --
because it is a cash market that hence carries none of the
systemic risk behind the 2008 crisis.
In that vein, it seems no surprise that UK finance minister
George Osborne has effectively kicked discussion of any further
changes, under the UK Fair and Effective Markets Review, back
past next year's parliamentary elections.
"I cannot now imagine the scenario under which Osborne or
any other politician presses for something heavier than what is
now on the table," one senior figure in London banking told
Reuters last month, speaking on condition of anonymity.
"I hope that means we can get back to something resembling
normal business pretty soon."
(Reporting by Patrick Graham; Editing by Giles Elgood)