Regulatory Authorities Nearing FX Manipulation Charges, Fines Approaching $41B?

Following a yearlong investigation via a number of global regulators alleging FX manipulation by many of the world’s leading banks, the potential costs associated with fines are starting to be weighed, revealing estimates of up to $41 billion in potential fines.

The roots of these allegations run deep, extending to all of the main banking players in the financial market – while there have presently been no formal arrests or charges by regulators into the manipulation of a $5.3 trillion a day industry, many banks have resorted to matters in house, suspending or firing traders and executives.

Alternatively, many banks have stepped up efforts to comply with regulators, including restructuring, the bolstering of compliance units, or bids for immunity. Citigroup analysts estimate that fines could approach record values, possibly exceeding a $41 billion threshold.

Presently it is impossible to measure or determine the exact level and extent of fines, though it seems fair to think that the cessation of regulatory action in light of an ongoing investigation will soon be coming to an end.

Amongst the most prominent banks being eyed for potential fines, Deutsche Bank AG, Barclays PLC, and UBS AG, all are expected to have steep penalties levied against them, quite possibly as high as 10% of their respective tangible book value.

The initiative is being spearheaded by both US and UK regulators, and is expected to reach a conclusion or begin lobbying charges by years end, although there could be settlements reached within the next month.

It is estimated by Citigroup analysts that UK regulatory authorities will themselves be responsible for up to $6.7 billion in fines across all guilty banks, which compares to an estimated $6.5 billion for all other European arms of the investigation. Conversely, estimates in the US are expected to hit $28.2 billion.