After nine banks - including Barclays, Goldman Sachs and HSBC - agreed on a $2bn settlement in a New York court, case lawyers warn that several global banks might face claims worth billions of pounds in London and Asia in relation to Forex rates rigging. The cases brought the lack of public supervision in the largest financial market in the world to light. With $5 trillion in transactions every day, the Forex market remains opaque and lightly regulated to this day.
David McIlroy, barrister at the Forum Chambers holds that a settlement in London, the largest foreign exchange trading hub in the world and about 40 per cent of the forex market, could amount to “tens of billions of pounds”.
While class actions are quite new in Britain, and claimants have to opt in to join the case (which can keep the settlement figures lower), new UK legislation which enables collective action might increase the number of claims in London.
The rate-rigging misconduct did not only bring about action from investors, but from regulators as well, as last November six banks paid $4.3bn in fines to Swiss and British regulators. Noting the smaller size of the US settlements compared to the fines imposed by regulators, Giles Williams, regulatory partner at accountancy firm KPMG, wonders whether regulators punish the behaviour rather than reparing the loss incurred by investors.
Even though some banks have announced that they set aside enough provisions to cover potential settlements, the rating agency Moody’s issued warnings on its assessment of Barclays and RBS noting the high litigation costs they face and numerous investigations.
BETTER FINANCE already took the opportunity to urge the authorities to increase supervision and transparency in this ‘no man’s land’ and tackle the problem of competition. These measures would then be beneficial for individual investors and consumers who could use a safer and more competitive market with reasonable prices for currencies.
More on the topic:
- Financial Times -"Banks braced for billions in civil claims over forex rate rigging",
- BETTER FINANCE's"Forex trading faces regulatory vacuum" and
- The Guardian - Nine banks including RBS settle $2bn forex rigging claim in US court".