As of November 2014, the U. S. Department of Justice (DOJ), along with other civil authorities and foreign regulators, is investigating multiple banks for possible manipulation of foreign exchange rate to their own advantage.
Within the past several months, banks and regulators have announced the investigations of Bank of America, JP Morgan Chase & Co. and Citigroup, Inc. in the United States. These banks are in august company, as they are joined by Barclays PLC, HSBC Holdings Inc., Royal Bank of Scotland Group PLC and USB AG in international investigations about manipulation of foreign currencies.
All the involved U. S. banks are apparently already in talks with the DOJ and other authorities to settle the matters with “mandatory remedial measures and penalties.” In fact, those banks have already set aside sums for settlement: JP Morgan Chase & Co. announced that it increased its reserve for legal expenses from $4.6 billion to $5.9 billion; and Bank of America announced that it set aside an additional $400 million for legal expenses and will adjust its 3rd quarter earnings down an additional 4 cents per share.
Settlement talks are reportedly progressing rapidly, as all involved banks would prefer a group announcement involving all the banks with all the government regulators in the U. S. and United Kingdom rather than revealing each bank’s settlement with each regulator. After settlements with the U. S. and United Kingdom, several of the banks reportedly plan to enter settlement talks with regulators in other geographic regions, such as Asia.
Critics of the settlement talks with U. S. regulators complain of supposed secretive, lucrative Department of Justice methods: there will be no specifics about what these banks have supposedly done; there will be no court hearing about the accusations; the government will decide what is illegal, prove it to nobody, decide on the fine and spend it however it wishes. That does appear to be the usual course taken by the DOJ, which does not help other potential plaintiffs who could benefit from the revelations of specific wrongful acts. Nevertheless, it does result in quick resolution and, most importantly, remedial measures that must be taken by the offending banks.
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