Treasury windfall expected from Barclays forex-rigging fine

George Osborne could be in line for a quick post-election windfall from a multimillion-pound fine to be imposed on Barclays for rigging foreign exchange markets.

The fine, from the Financial Conduct Authority (FCA), could be announced this week. At the same time, a fresh wave of penalties and fines for the banking industry are expected as US regulators prepare to punish major players for their role in manipulating the £3.5tn-a-day forex markets.

Royal Bank of Scotland will be among the banks involved in an anticipated settlement with the US Department of Justice, which is reported to involve pleading guilty to offences related to the way currency prices have been set. Barclays will also take a fresh blow to its bruised reputation as it is also being fined by the City regulator for its role in manipulating the currency markets.

Any fine imposed on Barclays by the FCA will provide an early windfall for Osborne as he returns to No 11 after the general election, as he has been using fines to give handouts to military charities and other causes.

The chancellor changed the rules to stop the fines being used to fund the regulator’s costs in the wake of Barclays’ fine for rigging Libor in June 2012. During the election campaign, David Cameron signalled a new use for the penalties, saying he would use a recent £227m FCA fine on Deutsche Bank to create 50,000 new apprenticeships.

The US justice department punishment may come this week and could involve the US banks Citigroup and JP Morgan. UBS is thought to have escaped prosecution by co-operating with the authorities. None of the banks would comment.

The penalties would be the latest to be imposed on the industry for forex rigging and follow the record £2.6bn in fines imposed in November on six banks by regulators on both sides of the Atlantic, including the FCA. Barclays pulled out of that co-ordinated settlement at the last minute, which is why it is now facing a penalty from the City regulator. The bank was said to have withdrawn from the original settlement under pressure from the New York regulator, the Department of Financial Services, run by Benjamin Lawsky.

Major UK banks have been preparing the ground for further fines in recent weeks, putting aside millions of pounds to cover the penalties. RBS, already fined £400m in November, took an extra £334m charge in the first quarter, it announced last month, while Barclays has taken a £2bn charge in preparation for regulatory settlements over foreign exchange rigging

When it took its additional charge last month, RBS made reference to “advanced settlement discussions regarding the criminal investigation being conducted by the [US department of Justice] and with certain other financial regulatory authorities”. HSBC, which was part of the November settlement, did not take any additional provisions when it reported its results last week.

The co-ordinated settlement in November was a first for the FCA and the US regulator, the Commodities Futures and Trading Commission. The regulators also published a raft of electronic chats and emails that had taken place between traders at different banks as they shared information about their clients. They called themselves “the players”, “the 3 musketeers”, “1 team, 1 dream”, “a co-operative” and “the A-team”.

The extent of the rigging of currency markets emerged after the Libor scandal, which prompted scrutiny of a range of other financial markets. The way in which commodity prices such as gold have been set have also been investigated and led to a £26m fine for Barclays in May 2014

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