Foreign exchange manipulation claims to incur $26B in litigation costs for Wall Street

The worldwide investigation by regulators on allegations about the manipulation of foreign exchange currencies has prompted banks to conduct their own internal investigations, and for some, put their traders on leave or have sacked them for good. On the other hand, a report on MarketWatch read that analysts are fearing that the investigations on foreign currency trading could cost the industry another $26 billion following some $46 billion in costs incurred on Libor and Euribor lawsuit claims.

The report cited analysts that the banks who would be mostly affected with the latest scandal will be Deutsche Bank and Citigroup, who are expected to be shelling out $3.9 billion and $3.8 billion respectively to settle potential claims.

MarketWatch said in its report that signs that the top banks in the world are caving in to the pressure of the investigations by US, UK and Swiss regulators are obvious for the markets to see. For one, Deutsche Bank fired three of its currency traders following a suspension of several traders in its New York office. It was not clear in the report whether the three were on leave prior to the termination. Lloyds Banking Group, on the other hand, suspended a trader after an internal investigation by the bank has been conducted, according to a Reuters report.

MarketWatch said that foreign-exchange rates are often being used by fund managers as a valuation basis for determination of investment values daily, which also includes pensions and savings accounts. KBW analysts have said that the lates rate manipulation scandal could set the industry back over the next ten years.

In the currency business, MarketWatch said banks Citigroup and Goldman Sachs will see its forex trading heads leave their posts for reasons other than the ongoing investigation on foreign exchange rate manipulation allegations. Anil Prasad of Citigroup is looking to pursue other interests after March, according to an internal memo. Steven Cho of Goldman Sachs will be retiring after 17 years with the investment bank.

Tags

Deutsche Bank, Citigroup, Lloyds Banking Group

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