Six big banks have been fined $4.3 billion by regulators in the US and the UK for manipulating foreign exchange rates. The banks that have been fined are; Citibank, HSBC, JPMorgan, RBS, bank of America, and UBS.
Foreign exchange rates are very important in determining the cost of imported products, value of investment funds and the earnings of companies. So this could have a very serious impact on the global economy if was left unchecked as well as affect the confidence that people have in the values given as exchange rate.
The surprising thing is that it is suspected that this could have been going on from as long back as the year 2008. One can only imagine how a few brokers have been exploiting this loop hole to enrich themselves and their employers.
It is said the traders mainly operated through private chat rooms for coordination of their buying and selling orders which would move the prices in their favour and thus make themselves money.
Watch this video explaining how they did it.
Official at the banks were said to not have been aware that such improprieties were going on although investigations are still going on to determine if this is true. Somehow I tend to think they knew or at least they must have suspected something but since they were making nice profits from it they decided to see no evil and hear no evil.
Such practices are unethical and put the entire forex market at risk, lets hope this is the last we hear of such practices.