A combo of Chinese currency RMB or Yuan, US Dollar, Hong Kong Dollar and other currencies notes is seen outside a foreign exchange shop in Hong Kong on March 12, 2015.
The figure is a starting point in settlement discussions, with some banks being asked for more and some less than $1 billion. One bank that has cooperated from the beginning is expected to pay far less, one of the people said. Penalties of about $4 billion are on the table, according to one of the people, though the number could change markedly.
Banks are pushing back harder than in some previous negotiations, including those for mortgage-backed securities, and the final penalties could be lower, people close to the talks said.
Peter Carr, a Justice Department spokesman, declined to comment, as did spokesmen for the banks.
Prosecutors are also pressing Barclays, Citigroup, JPMorgan and the Royal Bank of Scotland to plead guilty, people familiar with the matter have said.
In the worldwide investigation into currency-rigging, six banks have already agreed to pay regulators about $4.3 billion.
The Justice Department’s move signals that investigations are giving way to wrangling over issues such as whether the banks plead guilty to antitrust or fraud charges, what behaviors the banks will admit to in settlement documents and how much they will pay.
Bolstering Reserves
Barclays reserved 750 million pounds ($1.1 billion) for the currency settlement in the fourth quarter, bringing its total to 1.25 billion pounds. RBS took a 1.2 billion-pound charge in the same period for conduct and litigation, including a 320 million-pound provision for U.S. currency-rigging probes.JPMorgan Chase set aside an additional $1.1 billion, pre-tax, for legal expenses in the fourth quarter, without breaking out an amount for the currency settlement. Citigroup added $2.9 billion in the fourth quarter, in part to resolve foreign-exchange probes.
UBS set aside 176 million francs ($175 million) for legal charges in the fourth quarter, after allotting 1.84 billion Swiss francs the previous quarter.
Final settlements often vary significantly from the Justice Department’s initial demands as both sides hammer out an agreement over weeks or even months. During settlement talks for BNP Paribas SA over sanctions violations, penalties ranging from $3.5 billion to $15 billion were floated, according to a person familiar with the discussions. The bank ultimately agreed to plead guilty and pay $8.97 billion.
Singled Out
U.S. prosecutors are seeking a simultaneous settlement with the banks, which would enable the lenders to avoid being singled out for industrywide conduct, people familiar with the matter have said.The Justice Department had long shied away from seeking guilty pleas from banks over concerns criminal convictions could roil financial markets. However, markets shrugged off guilty pleas last year from Credit Suisse Group AG over helping Americans evade taxes and BNP over sanctions violations.
UBS, which was the first bank to notify U.S. authorities of possible misconduct in the foreign-exchange market, has been granted immunity from prosecution for antitrust violations, a person familiar with the matter has said.
As talks to resolve the U.S. cases advance, the Justice Department and New York’s state banking regulator have opened up a new investigation into whether banks abused a longstanding practice in the currency spot markets known as “last look.” The practice allows banks to back out of unfavorable trades at the last moment.
To contact the reporters on this story: Keri Geiger in New York at kgeiger4@bloomberg.net; Greg Farrell in New York at gregfarrell@bloomberg.net
To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net Joshua Gallu
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