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FX Probe Could See Settlements Top $41 Billion, Citigroup Analysts Say

Citigroup Inc. analysts estimate that investigations into claims of foreign-exchange benchmarks fixing could see banks potentially pay up settlements worth $41 billion.

German lender, Deutsche Bank AG is expected to bear the huge brunt of the fines, potentially facing penalties of up to 5.1 billion euros ($6.5 billion). The fines are expected to equal roughly 10 percent of its total worth of assets, or its tangible book value.

Based on the same calculation approach, Barclays Plc is expected to be slapped with 3 billion pounds ($4.8 billion) in penalties, while UBS AG risks a fine of 4.3 billion Swiss francs ($4.6 billion).

 “Extrapolating European and, more importantly, U.S. penalties from a previous global settlement suggests to us a total potential global settlement on this key issue,” said the Citigroup analysts in a note seen by Bloomberg News.

Watchdogs in various continents, especially in the U.S., Europe, and Far East, are investigating the possibility that forex traders in leading banks exchanged clients’ positions and conspired to fix currency benchmarks. U.S. and U.K. regulators are expected to enter into settlements with some lenders as soon as November.

The analysts at Citigroup based their calculations on a Reuters report dated Sept. 26 that estimated the U.K. Financial Conduct Authority penalties could involve fines amounting to around 1.8 billion pounds. They then calculated their estimates on how far the fines may go in other probes from that benchmark, using the settlements reached in the Libor cases as a reference point.

Citigroup accounts for the biggest proportion of the transactions in the $5.3 trillion-per-day forex market. The U.S. lender has 16.04 percent market share, with Deutsche Bank holding 15.67 percent share and Barclays with 10.91 percent. UBS has 10.88 percent share.

 

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