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HSBC Hit With $175m Fine For Unsafe Forex Trading Practices

HSBC Bank has had to face a number of financial penalties in recent times due to poor governance and forex trading violations. HSBC hasn’t been the sole violator as the UK’s Financial Conduct Authority (FCA) along with U.S. Commodity Futures Trading Commission have hit six major banks which includes HSBC with a combined $4.3 billion in fines in 2014.

HSBC had to make significant cuts during the last couple of years to get the funds together to pay those fines. The bank issued a statement confirming that it had rectified all forex related issues stemming from 2008 to 2013 and had everything in order.

However it looks like HSBC has still not got its act entirely together as the U.S. Federal Reserve recently announced that it found that HSBC still followed ‘unsafe and unsound’ practices when it came to foreign exchange trading and confirmed on 29 September that it was imposing a $175 million fine.

In a statement, the Fed said

The board levied the fine for deficiencies in HSBC’s oversight of and internal controls over FX traders. The firm failed to detect and address its traders misusing confidential customer information, as well as using electronic chatrooms to communicate with competitors about their trading positions

The Federal Reserve has also asked HSBC to make changes to its risk management policies and compliance procedures with regards to forex trading going forward. The bank will also have to address issues with internal control regarding its forex traders who buy and sell foreign currency and US dollars for their customers as well as their own accounts. HSBC shares dropped by 0.7 percent after the Fed Reserve announcement were made.

The $175 million forex violations fine on HSBC was made in the same week in which its former head of global forex cash trading went to trial in a New York court. Brit Mark Johnson is facing charges of manipulating confidential client information in a $3.5 billion currency conversion deal. Johnson is the first HSBC banker to go to trial based on the U.S’s investigation into currency and market manipulation. Johnson is alleged to have engaged in ‘front running’ which enables traders to make profits instead of their clients.

New HSBC chairman Mark Tucker will have his work cut out as he takes over responsibilities from former chairman Douglas Flint who retired and one of his immediate challenges will be to address the shortcomings of the bank’s global forex department.


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