U.K. Banks’ FX-Rigging Charges Hit $1.7 Billion in Quarter

30 Apr 2015 | Author: | No comments yet »

R.B.S. Posts First-Quarter Loss on Restructuring and Litigation Costs.

Royal Bank of Scotland Group Plc brings the amount British banks have set aside in the first quarter to cover the cost of settling probes of whether traders manipulated key currency benchmarks to more than $1.7 billion. The Edinburgh-based lender took a 334 million-pound charge ($516 million) for alleged foreign-exchange market rigging, adding to an 800 million-pound provision taken by Barclays Plc on Wednesday. In a news release, R.B.S., based in Edinburgh, said that it booked 1.3 billion pounds, or about $2 billion, in charges for its efforts to radically reshape the lender and for potential fines and settlements related to continuing inquiries into potential misconduct by its employees. That includes lawsuits and investigations into the selling of mortgage-backed securities in the United States and suspected manipulation of foreign currency markets.

R.B.S. was among a group of the world’s biggest banks that agreed in November to pay a combined $4.25 billion to end investigations by United States, British and Swiss regulators over accusations of conspiracy to manipulate the currency markets. RBS, Barclays and HSBC Holdings Plc have made provisions totaling about $6 billion pounds since authorities began a global probe into the rigging of currency markets two years ago. RBS Chief Executive Officer Ross McEwan told reporters on Thursday he expects the fine to be less than that. “Barclays’s problems are more serious because they didn’t join the group currency settlement last year and are regulated in New York, whereas RBS isn’t,” said Sandy Chen, an analyst at Cenkos Securities Plc in London. “It looks like regulatory charges will be an ongoing burden.” Rising legal bills and restructuring costs are undermining British banks’ efforts to shore up earnings. RBS on Thursday reported a first-quarter net loss of 446 million pounds after a profit of 1.2 billion pounds in the year-ago period, missing analyst estimates.

In February, the lender, which once had ambitions of being a global investment bank, announced plans to dismantle its investment bank and reduce its geographic footprint to about 13 countries from 38. The bank also is in the process of repaying a bailout of £45 billion it received during the financial crisis from the British government, which has a roughly 80 percent stake in the lender.

The Justice Department is pressing to resolve the probe with settlements that include guilty pleas from some of the institutions and penalties of roughly $1 billion for each bank, with some being asked for more and some for less, people with knowledge of the negotiations have said. The government also has said it’s preparing cases against individuals. “It will be out in the next couple of months, we’re still in final discussions with the DOJ,” McEwan said. “There are still many conduct and litigation hurdles looming.” RBS, Britain’s largest government-owned bank, paid $634 million to two regulators as part of last year’s settlement. Barclays, which wasn’t part of the November settlement, is now in “fluid, real-time dialogues” with regulators over reaching a deal, Finance Director Tushar Morzaria said.

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