November 7, 2014 / 1:27 PM / in 3 years

UK prepares forex fines for six banks on Wednesday: sources

LONDON (Reuters) - British regulators investigating allegations of collusion and manipulation in the foreign exchange market could fine a group of six banks as early as next Wednesday, people familiar with the matter said.

A branch of Barclays bank is seen in central London in this photograph dated October 22, 2014. REUTERS/Toby Melville

The six banks are Switzerland’s UBS UBSN.VX, U.S. banks JP Morgan (JPM.N) and Citigroup (C.N) and Britain’s HSBC (HSBA.L), Barclays (BARC.L) and Royal Bank of Scotland (RBS.L), sources said. They are expected to be fined a total of about 1.5 billion pounds ($2.37 billion).

It would be the first settlement in the year-long global probe into the $5.3 trillion-a-day foreign exchange market. Around 35 traders have been suspended or fired by their banks. No individual or institution has so far been accused of any wrongdoing.

A group settlement could be appealing to the banks, after Barclays in 2012 was singled out as the first bank to settle with regulators over a global investigation into the rigging of benchmark interest rates.

Three sources said the Financial Conduct Authority (FCA) was working to release the coordinated settlement with the banks on Wednesday, although they said that timetable could slip if problems emerge with details.

The regulator said there was no date confirmed for any settlement. JP Morgan could not be immediately reached for comment, and the other five banks all declined to comment.

U.S. regulators are also working towards a settlement. The U.S. Commodity Futures Trading Commission could announce a settlement with a group of banks around the same time, one U.S. based source said.

The group of banks in the U.S. settlement was not necessarily the same as the group in the UK deal, although there would be overlap.

New York’s banking regulator does not plan to coordinate with the impending settlements involving the FCA and certain U.S. authorities, according to a person familiar with the regulator, New York’s Department of Financial Services (DFS).

DFS superintendent Benjamin Lawsky views them as too weak, the source said, an indication he’s likely to go after the banks later and demand larger penalties.

Estimates on how much banks will be fined in total vary wildly, especially because it is unclear how much the U.S. Department of Justice will seek as part of is ongoing criminal probes into a group of global banks.

The UK fines are expected to be for lax internal compliance at the banks, oversight failures and possible market conduct breaches by individual employees, but not deliberate market manipulation, sources have said.

The British regulator could fine one bank between 300 million and 400 million pounds, and the other five are expected to be fined 200-300 million, one of the sources said.

The six banks all set aside money for potential settlements of forex investigations in their third quarter results, signaling part of the process was near to a conclusion. The six banks and Bank of America (BAC.N), Deutsche Bank (DBKGn.DE) and Credit Suisse CSGN.VX have set aside about $7 billion for legal provisions.

HSBC this week specifically set aside $378 million for a potential settlement with the UK watchdog.

The regulator notified the six banks of its planned settlement eight weeks ago, the sources said. One said they had to submit responses by Friday.

Earlier this year, banking research firm Autonomous put the worldwide potential settlement costs at around $35 billion.

Additional reporting by Karen Freifeld in New York and Kirstin Ridley Editing by Jane Merriman; Editing by Bernard Orr

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