FX Fixing: HSBC Sets Aside $378m to Deal with FCA Investigation

HSBC has confirmed that it has set aside $378m to help pay for administration costs and a potential fine related to allegations that bankers sought to manipulate key currency markets.

The bank revealed in its third quarter interim management statement that it is currently in discussion with the UK's Financial Conduct Authority (FCA) over settling allegations over FX fixing amid reporting a 12% slump in earnings.

"Discussions are ongoing with the UK FCA regarding a proposed resolution of their foreign exchange investigation with respect to HSBC Bank's systems and controls relating to one part of its spot FX trading business in London," said HSBC.

"Although there can be no certainty that a resolution will be agreed, if one is reached, the resolution is likely to involve the payment of a significant financial penalty.

"We continue to cooperate fully with regulatory and law enforcement authorities in the UK and other jurisdictions."

The daily $5tn (£3tn, €3.9tn) currency market is the largest in the financial system and is pegged to the value of funds, derivatives and products.

Morningstar estimates that $3.6tn in funds, including pension and savings accounts, track global indexes.

FX rates are calculated and compiled by using data from a variety of submitted provisions on a number of platforms, such as ThomsonReuters.

It is then calculated by WM, a unit of State Street, to form WM/ThomsonReuters at 1600 GMT daily.

HSBC, as well as a dozen global banks, are under investigation by US and UK authorities over FX rigging allegations.

Barclays set aside £500m to deal with a raft of investigations into allegations that traders at the bank had sought to manipulate the currency market while the Royal Bank of Scotland confirmed it has cordoned off £780m to cover all litigation and conduct related costs.