The banks have been fined for operating a "cartel" in the multi-trillion foreign exchange market.

The European Commission last week imposed a total of €261 million ($294.4 million) on UBS, Barclays, Royal Bank of Scotland (now Natwest Group) and HSBC for rigging the spot foreign exchange market. The Commission also fined Credit Suisse €83 million, it said in a statement last week. 

The actions stem from the sixth probe the Commission has made into cartel-like behaviour in financial services since 2013. Earlier in the previous decade, a number of banks were fined by national regulators for colluding to fix inter-bank interest rates known as LIBOR, prompting an overhaul of the system used to set market interest rates. 

“Foreign exchange spot trading activities are one of the largest financial markets in the world. The collusive behaviour of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers,” executive vice-president Margrethe Vestager, in charge of competition policy said.

The Commission's investigation focused on the trading of the G10 currencies, the most liquid and traded currencies worldwide. The probe found that some traders in charge of the forex spot trading of G10 currencies, acting on behalf of the fined banks, exchanged sensitive information and trading plans, and occasionally coordinated their trading strategies through an online professional chatroom called Sterling Lads, the Commission said in a statement.

“These information exchanges enabled the traders to make informed market decisions on whether and when to sell or buy the currencies they had in their portfolios, as opposed to a situation where traders acting independently from each other take an inherent risk in taking these decisions,” it said. 

Under the Commission's 2006 Leniency Notice, UBS received full immunity for revealing the existence of the cartels, thereby avoiding an aggregate fine of about €94 million. Barclays, RBS, HSBC benefited from reductions to their fines for cooperating with the Commission's investigation, the EC said. The cuts reflect the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the existence of the cartel in which they were involved, it said. In addition, under the Commission's 2008 Settlement Notice, the Commission applied a reduction of 10 per cent to the fines imposed on Barclays, HSBC, RBS and UBS, in view of their acknowledgment of participation in the cartel and of their liability in this respect.

“Since Credit Suisse did not cooperate under the leniency or settlement procedures, it did not benefit from any reductions granted within those frameworks. The Commission has however granted a total reduction of 4 per cent to reflect the fact that Credit Suisse is not held liable for all aspects of the case,” it said.