Bank parents or main units seen pleading guilty over FX: sources

Mon May 11, 2015 2:50pm EDT
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By Karen Freifeld

NEW YORK (Reuters) - The parent companies or main banking units of as many as five major banks, rather than their smaller subsidiaries, are expected to plead guilty to U.S. criminal charges over manipulation of foreign exchange rates, people familiar with the matter said.

A handful of banks will likely resolve forex-rigging investigations by the U.S. Justice Department as soon as this week: JPMorgan Chase & Co (JPM.N: Quote) Citigroup (C.N: Quote), British banks Royal Bank of Scotland (RBS.L: Quote) and Barclays (BARC.L: Quote) and Swiss bank UBS UBSG.VX.

It would be unprecedented for parent companies or main banking units, rather than smaller subsidiaries, of so many major banks, to plead guilty to criminal charges in a coordinated action, the people said.

Peter Carr, a spokesman for the U.S. Justice Department, declined comment. Spokespeople for Citi, JPMorgan, RBS, UBS, and Barclays all declined to comment.

If parent companies of U.S.-based JPMorgan and Citigroup plead guilty, it would be the first time in decades that a major American financial institution has done so. Last year, when Swiss bank Credit Suisse AG CSGN.VX pleaded guilty in the United States to helping wealthy Americans evade taxes, it became largest institution in over 20 years to plead to criminal wrongdoing. It was soon followed by French banking giant BNP Paribas (BNPP.PA: Quote).

U.S. authorities, fearing unintended reverberations such as the layoffs of innocent employees, have rarely sought criminal convictions against major global financial institutions and instead have allowed their smaller foreign subsidiaries to take the bullet.

Guilty pleas trigger a cascade of consequences. Banks may have to negotiate regulatory exemptions to avoid serious disruptions of business.

It has been called the "Arthur Andersen effect" after the demise of the big 5 accounting firm after its indictment in 2002 over charges related to Enron Corp's accounting scandal. Some 28,000 employees at the firm lost their jobs.   Continued...

People walk inside JP Morgan headquarters in New York, October 25, 2013.  REUTERS/Eduardo Munoz