Fed officials charged that the Paris-based bank and some of its U.S. subsidiaries had failed to detect FX traders’ unsafe practices.
The Federal Reserve Board reports levying a $246 million-plus fine against Paris-based BNP Paribas S.A. and “certain of its U.S. subsidiaries” for what it calls “unsafe and unsound practices” in the foreign exchange (FX) markets.
Fed officials allege that there were oversight deficiencies via the “the world’s seventh-largest financial services company by revenue [$126.2 billion].” Authorities say that there were problems with internal controls for FX traders working in “U.S. dollars and foreign currencies for the firm’s own accounts and for customers.”
The exact amount of the fine that the Fed required BNP to pay is $246,375,000, which is in addition to the “$350 million settlement in May with the New York State Department of Financial Services over the [same] deficiencies,” according to The Independent, a U.K. newspaper that also observed that BNP Paribas is the “latest in a line of banks fined in currency probes.” Fed officials also acknowledge the prior DFS fine.
Specifically, BNP Paribas “failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions,” according to Fed officials.
“Certain FX traders in the spot market at BNPP,” the Fed says, “routinely communicated with FX traders at other financial institutions through chatrooms on electronic messaging platforms accessible by traders at multiple institutions.”
The Fed charges that those FX traders, talking to each other in multi-bank chatrooms, made “disclosures of trading positions and [engaged in] discussions of coordinated trading strategies with traders of other institutions.”
The Fed also charges that the traders engaged in “discussions about anticipated FX benchmark fix-related trading and submissions with traders of other institutions”; disclosed to “traders of other institutions … confidential customer information of BNPP”; engaged in “discussions regarding bid/offer spreads offered to FX customers with traders of other institutions”; and engaged in “discussions of trading in a manner to trigger or defend certain FX barrier options within BNPP, in order to benefit BNPP,” among other prohibited activities.
Those actions took place between 2007 and 2013, the Fed says.
The Fed also notes that, in January of this year, it “permanently prohibited” a former BNP Paribas trader “from participating in the banking industry for his manipulation of FX prices,” and it is also “prohibiting the firm from re-employing individuals who were involved in the conduct underlying this enforcement action” against BNP Paribas.
Although the Fed’s actual order to cease and desist doesn’t name the trader, it does point out that “on January 4, 2017, a former BNPP Securities employee and FX trader, pled guilty to a criminal violation of the U.S. antitrust laws based on a conspiracy to eliminate competition in the purchase and sale of the U.S. Dollar / South African Rand currency pair.”
The BNP Paribas fine is the “latest punishment in a currency rigging scandal that has led to billions in fines on both sides of the Atlantic,” BBC News observes. “The Federal Reserve alone has issued more than $2bn in fines against seven banks tied to the scandal.”
“BNP Paribas deeply regrets the past misconduct which was a clear breach of the high standards on which the Group operates,” the bank said in a statement released after the Fed settlement.
The Fed also calls on BNP Paribas to “improve its senior management oversight and controls relating to the firm’s FX trading,” and notes furthermore that the banking group has “conducted comprehensive group-wide remediation initiatives, including automating certain trading activities, and is committed to remediating the risks identified in the investigation.”
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