U.S. regulators plan to join their UK peers in a multi-billion-dollar settlement with a group of the biggest global banks accused of manipulating the foreign exchange market, sources familiar with the matter said, adding the deal could come as early as next week.
The U.S. Commodity Futures Trading Commission, which oversees futures and swaps trading, aims to announce its settlement around the same time as London's Financial Conduct Authority, said one of the sources, who was not authorized to speak publicly.
The U.S. Office of the Comptroller of the Currency and the Federal Reserve, which regulate banks, would also join, a second source familiar with the talks said, although the exact timing may not align with the UK because of when markets open.
The CFTC, the OCC and the Fed declined to comment.
The UK deal is with six banks that could reach a combined total of roughly 1.5 billion pounds ($2.38 billion). They are Britain's RBS (RBS.L), Barclays (BARC.L) and HSBC (HSBA.L), Switzerland's UBS (UBSN.VX), and Wall Street giants JPMorgan (JPM.N) and Citi (C.N).
A group settlement could be appealing to the banks, after Barclays in 2012 faced a public flogging when it was the first bank to settle with regulators over a global investigation into the rigging of Libor benchmark interest rates.
The UK settlement is likely to be based on banks' lax internal compliance, oversight failures and possible market conduct breaches by individual employees, but not deliberate market manipulation, sources have said.
But the settlement is not expected to resolve a criminal investigation by the U.S. Department of Justice. It is also unclear whether it will include a probe by the New York's Department of Financial Services, led by Benjamin Lawsky.
The U.S. DOJ "is much more interested in taking scalps and looking aggressive," said a source familiar with the allegations.
Also, some of the banks could end up pleading guilty to criminal charges to resolve the DOJ probe, which could touch off further consequences for regulators to address, including revoking licenses.
In the UK, prosecutors are also investigating criminal allegations, although the outcome is unclear.
COSTLY SETTLEMENT
The timing of the UK settlement, the first in a year-long global probe into the $5.3 trillion-a-day foreign exchange market, is still fluid but is expected to come before Nov. 26, when FCA head of enforcement Tracey McDermott speaks at a London conference.
The group of banks in the U.S. settlement was not necessarily the same as the group in the UK deal, the second source said, although there would be overlap.
Bank of America (BAC.N) said on Thursday it was in "advanced discussions" with U.S. banking regulators over foreign exchange and that it would take a $400 million charge because of litigation expenses in its third quarter.
Estimates vary widely on how much banks will be fined in total for FX. Earlier this year, banking research firm Autonomous put the worldwide total at around $35 billion.
That would dwarf the $6 billion paid so far by 10 financial firms to settle allegations of wrongdoing related to benchmark interest rates such as Libor.
