The settlements by five global banks for manipulating the foreign currency markets show a strategy based on strength in numbers: The more banks that are disciplined, the less any one of them will be the focus of public attention for their violations, according to a New York Times commentary today. The total fine of $4.25 billion imposed by British, American and Swiss regulators sounds like a lot of money, but no one bank has to bear the brunt of the bad publicity. The Justice Department is sure to seek additional fines as part of deferred prosecution agreements that can also be expected to impose new monitoring costs on the banks to avoid future violations. So why would UBS, HSBC, Royal Bank of Scotland, JPMorgan Chase, and Citigroup agree to settle the civil cases rather than try to wrap up the entire case at once? The reason, according to the commentary, reflects an evolving strategy by the banks as they learn to navigate among regulators and prosecutors spread across the globe to minimize the impact of the settlements. The goal is to have the markets react positively to the resolution of a case while ensuring that their bottom lines are not harmed too much by the monetary penalties.
