The US Department of Justice trumpets $9bn in fines related to rigging foreign exchange benchmarks so far, with the bulk of the figure announced in a $5.6bn broadside on Wednesday.
This latest fine, from only six banks, isn’t far off the annual revenues of the FX market (and likely far in excess of the profits). Data firm Coalition, a data firm, estimates the largest 10 institutions made $6.5bn from G10 FX last year, for example.
The conduct issues cover several years, but still, it is hard to believe that the fines are even slightly related to how much banks benefitted, or how much their customers lost out, from FX manipulation.
Some of the “conduct issues” also look like pretty small potatoes. Telling a customer they could talk to a trader direct, then having a salesperson make hand signals to them to indicate mark-up — that is pretty much what traders and salespeople are supposed to do.
The trader provides pricing, filtered through the salesperson’s intel about what the customer wants to do and what price they can afford. If any client dealing in the OTC FX market believed their sales coverage was actually working for them, against their own trader — well, GlobalCapital has a bridge to sell them.
But by lumping in truly awful conduct — Deutsche lying to its regulator over Libor, BNP Paribas financing the genocidal regime in Sudan — with the sort of idiots who called a chatroom “The Cartel”, regulators devalue enforcement actions.
The market, and banks themselves, are getting inured to such treatment — all the banks involved had provisioned for the fines and their share prices went up on the news.
Banks and their shareholders absolutely should not start treating fines as a cost of doing business, and genuine criminal conduct should mean jail time. But when fines are handed out in vast quantity with opaque justifications, they just look like revenue raising and political grandstanding.