HSBC has agreed to pay a $101.5m penalty in a settlement with the US justice department over its attempts to manipulate foreign exchange markets, allowing the bank to avoid pleading guilty to criminal charges.
The move, which makes HSBC one of the last big banks to reach a settlement for forex rigging, means it will be subject to a three-year deferred prosecution agreement that holds open threat of criminal charges should it break the rules of the deal in that time.
Banks have paid more than $10bn of fines to US and UK authorities since a scandal erupted several years ago over how they had been attempting to manipulate the $5tn forex markets for their own gain and at their clients’ expense.
Senior directors of HSBC are still relieved that they have managed to reach a settlement with the DoJ without having to enter a guilty plea, as other banks have previously been forced to do. The bank also avoided having a monitor appointed to oversee its clean-up efforts.
The bank said it benefited from a 15 per cent lower penalty “in recognition of HSBC’s co-operation during the investigation and its extensive remediation”. It added that the cost of the settlement had already been covered by provisions.
The bank said it had agreed to take additional steps to enhance a compliance programme and internal controls in its investment banking unit.
“The conduct described in the agreement occurred in 2010 and 2011,” it said. “Since then, HSBC has introduced a number of measures designed to make the control environment in its global markets business more robust.”
The settlement, which HSBC announced late on Thursday after the DoJ filed the deal with a US judge, comes only months after Mark Johnson, HSBC’s former head of cash FX trading, was convicted in a New York court of front running a large client’s currency order.
It also comes only weeks after the DoJ announced that it was lifting a five-year deferred prosecution agreement that the bank viewed as a “sword of Damocles” hanging over it since a settlement of money laundering and sanction breaches.