Barclays earmarks £750 million for foreign exchange fines

Barclays Bank has earmarked an extra £750 million pounds for expected foreign exchange currency rigging fines which have hit the bank’s profits for 2014.

Pre tax profits at Barclays Bank fell from £2.9 billion to £2.3 billion last year as it made a total of £1.25 billion in foreign exchange provisions and set aside £1.1 billion for PPI mis-selling compensations.

The £750 million pound foreign exchange charge in the fourth quarter of 2014 means that Barclays bank’s provisions to date exceed those of HSBC and RBS (Royal Bank of Scotland). Barclays is still yet to settle with the FCA (Financial Conduct Authority) and U.S regulators.

Barclays pulled out of settling allegations its traders tried to rig foreign exchange benchmarks in a deal between US and UK authorities and six rival banks in November last year because it had not reached a deal with New York’s regulator. HSBC and RBS have paid fines to at least some authorities.

Barclays is currently in talks to pay a total of less than £1 billion pounds to the three US and UK agencies to settle allegations that the bank manipulated foreign exchange markets.

How The Foreign Exchange Market May Have Been Manipulated

Each trading day, a currency “fix” rate is agreed, based on the price that currency trades at over a 60 second period. At the centre of the probe seems to be traders eager to make a quick profit by buying up currencies just before they knew clients were going to buy large amounts of the same currency at the daily “fix”. This way the traders could sell on at a profit when the price rose at the “fix.”

Some currency dealers also appear to have passed on information to traders at other companies about big upcoming foreign exchange trades. All of this could have artificially raised the value of one currency against another.