This picture shows the Citigroup skyscraper building in Canary Wharf in London on September 18, 2013. AFP PHOTO / JUSTIN TALLIS (Photo credit should read JUSTIN TALLIS/AFP/Getty Images)
USA TODAY - Citigroup, JPMorgan Chase and Royal Bank of Scotland are the latest global banks confirming that their foreign exchange trading is under investigation.
In its third-quarter earnings report Friday, New York-based Citigroup said it had "received requests for information" from government agencies probing the issue and was "cooperating with the investigations and inquiries and responding to the requests."
JPMorgan Chase's quarterly filing also filed Friday said the New York-headquartered bank was cooperating with requests from "relevant authorities" about foreign exchange probes that are "in the early stages."
Similarly, Royal Bank of Scotland's third-quarter earnings statement said the bank had received inquiries about the trading from several governmental and regulatory authorities, including Great Britain's Financial Conduct Authority.
RBS said it "is reviewing communications and procedures relating to certain currency exchange benchmark rates as well as foreign exchange trading activity and is cooperating with these investigations."
RBS also listed the foreign exchange investigation and other trading probes as risk factors that could materially affect its future financial results. The statement said at this stage, the bank "cannot estimate reliably what effect, if any, the outcome of the investigation may have."
British banking giant Barclays, UBS, Switzerland's largest bank, and German banking giant Deutsche Bank previously made similar disclosures to investors about the foreign exchange investigations.
The U.S. Department of Justice on Tuesday confirmed it had "an active, ongoing investigation into possible manipulation of foreign exchange rates" by traders at several banks. Swiss authorities are also investigating.
At least in part, the probes are believed to focus on suspicion that traders at several banks may have colluded via electronic messages and used inside knowledge about large trade orders placed by clients to manipulate rates. Investigators are also believed to be examining whether traders attempted to influence benchmark foreign exchange rates reported by WM/Reuters by submitting trades during the times when those rates are set.
Many money managers, pension funds and other institutional investors rely on the WM/Reuters rates for foreign exchange investments.
The foreign exchange investigations represent the latest multinational examination of financial benchmarks that affect trillions of dollars in personal and business transactions. Investigators are also probing evidence that bank traders manipulated the London Interbank Offered Rate, which is used to set rates on mortgages, credit cards, loans and some financial derivatives.
RBS' financial statement also cited the Libor investigations as a potential risk factor that could affect its financial results.
The bank, chiefly owned by the British government following a financial bailout, also announced Friday that it would shift approximately $61 billion in bad loans into a newly created internal entity.
The goal behind creation of the so called "bad bank" is to remove 55% to 70% of those assets over the next two years and thus speed up an overhaul of operations and improve the overall bank's financial health, according to the RBS financial statement.
"The bar has been set at a higher level for RBS than for other UK banks because we were rescued at the public's expense," said bank CEO Ross McEwan in announcing the effort to return money to taxpayers.
RBS shares closed down nearly 8% at $10.85 in Friday trading. Citigroup shares closed down fractionally at $48.74. And shares of JPMorgan Chase closed up nearly 2% at $52.51.
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