Update on Forex manipulation. Also, another thought why the banking fiascos won’t be ending anytime soon

Previously mentioned the big banks are under investigation for allegedly manipulating forex: Next banking fiasco? Manipulating foreign exchange rates? Those are the rates used to trade currencies. In addition to admitting manipulation of Libor, many banks now stand accused of manipulating forex.

Just two updates..

10/30 – Wall Street Journal – Big Banks Brace for Penalties in Probes – Tons of leaks feed the story of the typical cast of big banks being in negotiations to settle allegations of their manipulating foreign exchange rates, or forex. Big news to me is the banks are all trying to settle at the same time with all of the regulators.

(If one company reaching a simultaneous agreement with every regulator is called a global settlement, then if every company in the industry reaches an agreement with all regulators on the same day, would that be called a global global settlement? Universal global settlement?)

Wild guesses are the penalties could run from $0.5B to $1.0B for individual banks, with the biggest individual settlement guessed to be maybe $1.5B.

Some leaks say settlement could be by end of 2014, others say early 2015, some even guesses that one or more banks might break out of the pack and settle by the end of this year.

Here’s the cast of participants, which I’m starting to recognize as the players typically involved in these stories (see next article):

In the U.S., the Fed, the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission are speaking to a group of banks, including Citigroup, Barclays PLC, and J.P. Morgan Chase & Co. about the settlement. Those banks and others, including HSBC Holdings PLC, UBS AG, Deutsche Bank AG and Royal Bank of Scotland Group PLC, are in talks with U.K. regulators, these people said.

Obviously there is more going on than is leaked to this reporter to feed this article. Having said that, all comments in the article except one are pointing to how much money the various regulators are looking to get out of the deal. The leaks suggest the Feds here in the U.S. decided in the last few days that they want to wrap this up quickly. The tone of the leaks and the article reminds me of Sam Antar’s comment that Huge fines are a tax on illegal behavior.

8/6/12 (over two years ago) – Francine McKenna at American Banker – Banks are Being Punished, Again and Again, to No Avail – Deferred prosecution agreements let alleged offenders off by paying a fine, without admitting guilt, and with promising to be better in the future. Ms. McKenna points out that previous DPAs and even non-prosecution agreements tend to be forgotten in the next round of settlement talks. Avoiding serious collateral damage seems to be the reason to avoid dealing with the ugliness that this fiasco violated the DPA of the previous fiasco.

Great closing comment that is still valid today, multiple rounds of settlements and two years later:

We’ll see no justice as long those charged with protecting the public, the taxpayers and the investor are more worried about quick court wins and maintaining bank profits than punishing illegal activities once and for all.

She is pointing at the SEC and Department of Justice.