US Fed fined HSBC over unsafe forex trades

HSBC has been fined $175 million on Friday for 'unsafe and unsound' practices in its currency trading business by Fed, as Reuters reported.

HSBC failed to monitor chat rooms where traders swapped information about investment positions, the U.S. central bank said, echoing findings by other regulators investigating the $5 trillion-a-day foreign exchange or FX market.

“The board levied the fine for deficiencies in HSBC’s oversight of and internal controls over FX traders,” the Fed said in a statement.

It comes as former HSBC trader Mark Johnson, who is British, is tried in New York for allegedly making gains from $3.5 billion currency transaction for a client. Mr. Johnson denies the charges. His lawyer didn't immediately return a call.

The Fed said the bank's deficient policies and procedures allowed Mr. Johnson and another senior trader, Stuart Scott, to misuse information "in a manner that benefited them and their trading desk" to the detriment of the client. Mr. Scott has also been charged and is contesting extradition from the U.K. to stand trial. He denies the charges.

An HSBC spokesman said the bank was pleased to have resolved the matter with the Fed and declined to comment on Mr. Johnson's trial. The bank isn't named as a party in the action against Messrs. Johnson and Scott in New York.

This isn’t the first time HSBC, one of the biggest currency traders, has been fined for manipulating the world’s largest market. The bank paid penalties of more than $600 million to the U.S. Commodity Futures Trading Commission and Britain’s Financial Conduct Authority in 2014 for rigging currency benchmarks. HSBC is still under investigation by the U.S. Department of Justice for the conduct, the bank said in August, and has set aside more than $1 billion for possible settlements.

The bank has 90 days to submit a written plan to the regulator to improve its compliance with U.S. laws and regulations, the Fed said in the statement.