New York: Investors yawned at the news Wednesday that five of the world’s biggest banks, including JPMorgan Chase & Co and Citigroup, agreed to plead guilty in a currency rigging probe. They’re among six banks that will pay $5.8 billion (Dh21.3 billion) in fines.
Barely more than a year ago, criminal charges against major US banks were considered unthinkable, with lawyers and analysts viewing felony convictions as a death sentence and a threat to the financial system. Now, by granting waivers allowing lenders to keep operating even after a felony plea, the government has managed to punish firms while protecting them from fatal consequences.
“This is the first time you had Citigroup, JPMorgan or any US bank plead guilty essentially to criminal conduct — this is a bad day for American finance,” Mike Mayo, an analyst at CLSA, said in a televised interview with Bloomberg. “Having said that, this is more backward-looking than forward-looking.”
JPMorgan and Citigroup each slid 0.8 per cent in New York trading, while Bank of America, which paid $205 million in fines, fell 0.2 per cent. European firms that pleaded guilty rose, with Barclays climbing 3.4 per cent, UBS Group increasing 3 per cent and Royal Bank of Scotland Group up 1.8 per cent.
“It’s a bit weird, isn’t it?” Christopher Wheeler, a London-based analyst at Atlantic Equities, said in a telephone interview. “$5.8 billion and yet everybody is shrugging their shoulders.”
Little precedent
Last year, the Justice Department turned up the heat on non-US firms by requiring Paris-based BNP Paribas and Credit Suisse Group’s main bank unit to plead guilty to felonies. That raised questions about when and if US prosecutors would go after a domestic bank.
Before Wednesday, there was little precedent of healthy US lenders being convicted of crimes. Two other firms that did plead guilty to felonies — the Bank of Credit and Commerce International in 1992 and Washington’s Riggs Bank in 2005 — had already been wiped out.
For all the muted response to Wednesday’s news, Donaldson Capital Management’s Greg Donaldson expressed concern that criminal charges may now become routine. “Once you cross that line and admit you’ve done something bad, you open up Pandora’s box,” said Donaldson, chairman of the firm that manages about $1.1 billion. “This settlement just moved the goalpost.”
If convictions become too commonplace, the government may have to pursue even tougher penalties. Last year, Federal Reserve Bank of New York President William Dudley warned firms that they risk being “dramatically downsized” unless they stop breaking the law.
“Such prosecutions could represent a longer-term threat to these franchises,” Jaret Seiberg, an analyst at Guggenheim Securities, said Wednesday in a note to clients. Criminal guilty pleas “may alter the political landscape by giving more ammunition to those who want to break up the biggest banks,” he said.
