BNP Paribas Slapped With $246 million Penalty for Forex Misconduct
French bank BNP Paribas has recently arrived at a settlement with the US Federal Reserve Board to pay a sum of $246 million (£189 million) as a penalty for its involvement in a forex rate-fixing scandal. The bank received advice from top legal firm Allen & Overy in the multimillion-dollar settlement issue which pertains to misconduct that took place over a long period from 2007 to 2013.
The French banking giant has been in the crosshairs of US regulators for some time now. The company has been accused of having insufficient oversight of its foreign exchange traders, which led them to fix forex trading prices. Interestingly, the Federal Reserve had permanently debarred a BNP trader called Jason Katz from the banking industry because he had been caught fixing forex prices. As a matter of fact, US authorities hauled traders from the French bank and three other banks to court in connection with this case.
Forex traders from different banks used electronic chat rooms to co-ordinate their trading strategies with each other while also sharing confidential information about customers so that they could bring in good returns. The other members of the “Cartel” as the group was called are Citigroup’s Rohan Ramchandani, Barclay Bank’s Christopher Ashton, and Richard Usher of JPMorgan Chase.
In a statement released by the Federal Reserve, the bank did not notice its traders using electronic chat rooms to conduct discussions about foreign exchange prices with its competitors and therefore did nothing to address the issue. The bank was chided to improve its supervision and controls of its forex trading business.
BNP responded saying that the company had put measures in place to strengthen oversight of its operations so that misconduct such as the one that occurred between 2007 and 2013 could not take place again. The company also said that it regretted the misconduct that occurred, reiterating that it was a breach of its high operational standards. It went on to say that it had taken proactive steps to ensure that such activities would not take place again. In fact, the bank fired some of its traders from not just its New York but also its Tokyo and London offices, while taking disciplinary action against others.
BNP also faced a $350 million fine by the Department of Financial Services of the state of New York in connection with the same incident. Furthermore, the company was disallowed from re-hiring any of its employees who were found taking part in the incident. The French banking giant has had to foot a bill of more than $600 million in this connection.
The action against BNP came on the heels of the one taken against Deutsche Bank on account of its wrongful foreign exchange trading practices. The German bank had been fined around $150 million in that instance. Banks have had to face the heat from authorities in the United States and the United Kingdom because of the actions of traders who colluded with each other to influence forex trading prices and had to pay out billions of dollars overall in many civil settlements. BNP itself has had to pay fines worth $9 billion to US regulators in 2014 alone.
When asked whether it was facing any action by regulators in other countries, BNP refused to give an answer. However, the company will not have much problem paying these fines and also its considerably large legal bill. It has been growing in strength over the past few years, with 2017 Q1 net income climbing 4.4% to touch an impressive €1.89 billion. The company has also been raising dividends regularly in a sign of robust health.