Barclays faces larger fine as New York DFS seeks more 'severe' penalty
Barclays may be facing a much larger regulatory fine for forex rigging because New York’s Department of Financial Services (DFS) refused to join with other regulators in agreeing a group settlement with the bank.
New York's chief banking regulator, Benjamin Lawsky, told Barclays last week that he would not join the other regulators, according to Bloomberg, citing sources close to the DFS on Thursday.
This implied Barclays had to pull out from the group settlement, which is likely to result in it missing out on the standard 30% discount from regulators for prompt payment.
Lawsky felt the coordinated settlement over rigging currency rates "wouldn’t be severe enough", Bloomberg reported, and instead is continuing his own probe, appointing Devon Capital as a monitor to review Barclays’s continuing conduct.
Barclays is the only one of the UK banks that is also regulated by the New York DFS.
On Wednesday, the bank had said it "has considered a settlement" from the UK and US regulators on similar terms to those announced with the other five banks but rejected this in order to wait for a "more general coordinated settlement" with all regulators, including the New York DFS, US Department of Justice, the Securities Exchange Commission (SEC) and Swiss regulator FINMA.
In relation to Barclays, the FCA added: "We will progress our investigation into that firm which will cover its G10 spot FX trading business and also wider FX business areas".
Analyst Gary Greenwood at Shore Capital said he anticipated that Barclays will "eventually be hit with a larger penalty" than its UK peers, but noted that the bank has already set aside a relatively larger provision.
Larger legal claims may lie ahead for all banks
Lawyers have warned that the banks could face legal claims from clients affected by the collusion, which could much larger than the regulatory fines.
“They were fiddling forex rates for almost six years in a market this big, so just look at the numbers – the damage has got to be in the billions,” Anthony Maton from law firm Hausfeld told City A.M. The potential claims had the potential to “dwarf the fines without a shadow of a doubt," he added.
“Any person or entity that engaged in FX transactions directly or indirectly with one or more of the colluding banks between 2008 and 2013 may have a civil claim,” Maton added, according to The Guardian.
Simon Hart, banking litigation partner at lawyers RPC, said: “These fines and the evidence published today could trigger a flood of civil litigation from pension funds and other fund managers that lost money because of forex manipulation moving prices against them.”