The Federal Reserve on Wednesday fined Charlotte-based Bank of America $205 million for shoddy practices in its foreign-exchange operations, on a day when six banks racked up more than $5 billion in penalties for their misconduct in currency and other markets.
In the most serious action, five of the banks – Citigroup, JPMorgan Chase, Barclays, The Royal Bank of Scotland and UBS – agreed to plead guilty to felony charges and to pay about $2.7 billion in criminal fines in a deal with the U.S. Justice Department. The sanctions are the latest in a long-running investigation of the banks’ practices.
“The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct,” Attorney General Loretta Lynch said in a statement.
Traders at JPMorgan Chase, Citigroup, Barclays and the Royal Bank of Scotland were accused of conspiring among themselves to manipulate rates on the foreign-exchange market, where hundreds of billions of dollars and euros change hands. Meanwhile, UBS agreed to plead guilty to manipulating benchmark interest rates, after breaching a 2012 nonprosecution agreement.
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The punishments are the latest effort by the Justice Department to take on financial crimes but didn’t include charges against executives. The five banks agreeing to guilty pleas will continue cooperating with the government, and the agreements don’t prevent prosecutions against individuals. The fines, while large, are a fraction of what the institutions have made through currency trading over the past decade.
Critics on Wednesday said the banks were once again getting off light.
“Until the feds personally and meaningfully punish actual executives and supervisors for their wrongdoing, big banks will continue their crime spree at the expense of investors, our markets and families on Main Street,” Dennis Kelleher, president of Better Markets, a nonprofit that advocates for financial reform, said in a statement. “Pleading guilty to a crime must mean jail time.”
In its action, the Federal Reserve imposed $1.8 billion in fines against six banks, including Bank of America, resulting in some of the biggest penalties in the regulator’s history. The lenders had deficient policies and procedures and failed to detect and address improper actions by their traders, the Fed said.
The six banks must improve their senior management oversight, internal controls and other areas. The institutions also are prohibited from re-employing employees accused of the misconduct.
Bank of America’s deficiencies prevented it from detecting and addressing a variety of conduct by its traders from 2008 to 2013, according to the regulator.
The nation’s second-biggest bank also failed to detect disclosures of confidential customer information its traders made to counterparts outside the bank, the Fed said. The bank also did not identify possible agreements between its traders and those with other institutions to manipulate currency prices, the regulator said.
Bank of America’s fine was lower than amounts imposed on the five other banks because the traders at those banks actually entered into illegal agreements, the Fed said. Bank of America has already begun addressing its deficiencies, but it must continue to make improvements, the regulator said.
Bank of America spokesman Lawrence Grayson said the bank’s fine will be covered by existing legal reserves. He declined to comment further.
It’s the latest costly legal action against the Charlotte bank, which has been hammered with large fines and other legal costs since the financial crisis, mostly stemming from its mortgage operations. Misconduct in its foreign-exchange business also has been costly.
Last month, Bank of America said it paid $180 million in a settlement to resolve claims it helped rig the foreign-exchange market. That deal was reached with various investors that had accused the bank and other financial institutions of conspiring to manipulate benchmark trading rates.
And in November, the Office of the Comptroller of the Currency fined Bank of America $250 million to settle charges of deficiencies in the lender’s oversight of its foreign-exchange business. Bank of America was among other banks the regulator said had unsafe or unsound practices.
Rounding out Wednesday’s fines, Britian’s Barclays also will pay about $1.3 billion to settle related claims with the New York State Department of Financial Services, the Commodity Futures Trading Commission and the United Kingdom’s Financial Conduct Authority.
Bank of America’s shares fell to $16.74, a drop of less than 1 percent. The Associated Press contributed.