Five of the world's largest banks face around $5.7 billion in penalties for illegally colluding to manipulate prices in currency exchange.
Officials at the U.S. Department of Justice said Wednesday that currency traders at these banks worked as collaborators rather than as competitors, making or holding off purchases to manage the prices of dollars and euros. The group of traders called themselves "the cartel" and used electronic chat rooms and coded language to manipulate rates.
U.S. Attorney General Loretta Lynch said the huge fines were justified because "The prices the market sets for those currencies influence virtually every sector of every economy in the world." Other officials said the euro-dollar currency market is "five times" the value of all U.S. stock markets.
Lynch added that the actions "inflated the banks' profits while harming countless consumers, investors and institutions around the globe – from pension funds to major corporations, and including the banks’ own customers.”
Four of the banks, Citigroup, JPMorgan Chase, Barclays, and the Royal Bank of Scotland, admitted violating antitrust laws. The fifth bank, UBS, faces penalties for manipulating a key interest rate.
Some of the fines were imposed by the U.S. Federal Reserve and officials in Britain.
Mark Taylor, dean of the business school at the University of Warwick in Coventry, England, said the practices “cheated every one of us” and strike “at the heart of business ethics.” Professor Taylor’s research includes foreign currency issues, and he called for some technical changes that would make it more difficult to manipulate currency markets.