Of all the financial markets that should be resistant to manipulation, foreign exchange surely tops the list. With $5.3 trillion traded daily by thousands of buyers and sellers across the world, this should be one hyper-efficient market.
And yet six major banks recently agreed to a $4.3 billion settlement with U.S., U.K. and Swiss authorities over charges that the banks had failed to prevent traders from attempting to manipulate the market. In all three countries, it is possible that criminal charges against individuals may follow.
The settlement is the latest in a long line of massive legal actions that hold banks responsible for the activities of their employees. Prosecutorial efforts to hold shareholders liable for myriad problems that bank employees have caused seem to have no end in sight. The goal of these actions is to prompt boards and their managers to reform banking cultures. If banks want to avoid more floods of litigation in the future, they’ll have to act fast.
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