It’s time we open our eyes. Yes, the rich are different from you and me – and that includes the banking industry.
The latest exposure of massive misdeeds in the financial world – all things being uncovered now in the wake of the big downturn – points to banks in the US, Switzerland, and Great Britain conspiring to steal from their customers to rig the foreign currency market, the world’s biggest and least regulated market. The rigged markets allowed each bank to make bigger profits, and the banks under investigation are getting off, so far, with fines that amount to another cost of doing business.
Oh, heads are rolling – the heads of about 30 fairly low-level currency traders who were caught passing messages in private electronic chat rooms about how to keep “numptys,” or stupid colleagues, out of their business. The traders apparently formed groups with names like “the three musketeers” and “the A-team” and banded together with traders at other banks to share private information about clients that would help them rig trades.
The foreign currency market trades about $5.3 trillion each day, many times more than the amount traded on Wall Street. The rates of exchange change every day at the same time, and traders at the banks being fined, along with traders at other banks under investigation, were accused of flooding the market with trades just before the daily rate change to raise rates and increase their banks’ profit.
Bank regulators have been investigating the matter, and negotiating with the banks involved, for months in an effort to clean up the industry a bit after uncovering other misconduct that led to the financial crisis, such as the fixing of the London interbank offered rate, or Libor, a key global interest-rate benchmark. Several banks have already reached settlements in those cases.
Six of the world’s biggest banks (the Swiss bank UBS, the British banks HSBC and the Royal Bank of Scotland, and US banks JPMorgan Chase, Bank of America, and Citigroup – the banks most willing to reach a settlement rather than necessarily the most guilty), having recently been levied a total of $4.25 billion in fines for rigging the foreign exchange market, are now, predictably, tightening up their internal controls and tsk-tsking about their employees’ “unacceptable” and “improper” conduct, and looking forward to “closing the matter.”
No mention has been made of reparations for the clients stolen from, nor of any responsibility of higher-ups at the banks for their employees’ actions.
Investigators, sensing a more widespread culture of corruption that extends into the upper echelons of bank management and the far corners of the financial industry, could implicate many more than the handful of banks fined so far. The banks fined, and other banks as well, could still face criminal charges in the matter (the US feds are reportedly planning to file charges against at least one bank by the end of the year), as could individual bank employees. But chances are those individual bank employees will not be the bank presidents, or even the vice presidents.
What do you think could be done to prevent corrupt bank practices? Tell us your opinion below.
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