The foreign exchange market is one of the largest and most critical components of the global financial system, where benchmark rates dictate transactions worth trillions of dollars daily.
The international investigations into the manipulation of the international foreign exchange markets offer a stark modern precedent: major banks can face direct corporate criminal conviction for systemic misconduct without regulators taking a decision to close down the banks and require liquidation.
In contrast to the historical treatment of the Bank of Credit and Commerce International (BCCI), the foreign exchange scandals highlight a glaring regulatory inconsistency. When pervasive institutional wrongdoing is uncovered, contemporary authorities possess and frequently deploy frameworks to punish criminality and mandate structural reform while preserving legitimate banking operations.
What Was Established?
On 20 May 2015, the US Department of Justice (DOJ) announced that Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc agreed to plead guilty to felony antitrust charges for conspiring to rig the US dollar–euro foreign exchange spot market.
Traders at these banks formed an exclusive electronic cartel, using private chatrooms to coordinate trading strategies, deliberately influence benchmark rates, and withhold bids or offers to protect their own positions.
The four banks agreed to the following criminal fines totalling US$2.520 billion:
Barclays paid an additional US$60 million penalty for breaching a separate, concurrent non-prosecution agreement.
These resolutions were explicitly levied at the parent-company level. They were not dismissed as isolated compliance failures or restricted to individual rogue employees; the institutions themselves accepted corporate criminal liability.
Criminal Liability Without Closure
The significance of these cases lies in the deliberate enforcement mechanism chosen by global regulators. Despite pleading guilty to felony charges, none of these parent banks were ordered to cease operations, had their licences withdrawn, or were placed into liquidation.
Instead, regulators deployed a tiered enforcement framework:
- Parent-level guilty pleas to establish institutional accountability.
- Severe financial penalties to penalize illicit profits.
- Targeted criminal prosecution of the specific individuals involved.
- Mandatory corporate governance overhauls under the threat of licence revocation.
- Independent compliance monitors embedded directly within the operations.
Regulators separated the criminal misconduct of individuals and corporate units from the utility of the wider banking institution. They explicitly determined that the banks were capable of internal reform and that preserving their legitimate commercial activities was paramount to market stability.
The Comparison With BCCI
The core comparative issue between the foreign exchange cases and BCCI is not the underlying mechanics of the misconduct, but the regulatory principles applied. In the foreign exchange interventions, authorities separated criminal punishment from institutional execution. For BCCI, the Bank of England conflated the two, enforcing an abrupt, global shutdown that bypassed the very restructuring options it had previously agreed in principle.
Historically, the Bank of England justified its intervention by citing the scale of BCCI's structural failures. However, the historical record reveals a deeply flawed evidentiary timeline:
- Initial Treasury Losses: Price Waterhouse quantified BCCI's Central Treasury losses at US$285 million, explicitly attributing them to incompetence, trading errors, and a lack of sophisticated market expertise not fraud.
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Early Supervision: The Bingham Inquiry into the supervision of BCCI confirmed that early supervisory reports received by the Bank of England contained no suspicion of systemic malpractice, fraud, or intentional default.
- The 1990 - 1991 Rescue Plan: Abu Dhabi backed a comprehensive restructuring plan. It provided substantial sovereign capital, a clean sweeping of senior management, the isolation of bad assets, and a split into independently regulated corporate banks.
- The Section 41 Pivot: The Bank of England abruptly abandoned this agreed-in-principle rescue framework, moving to a catastrophic liquidation based entirely on a confidential, unverified draft Section 41 Report it had commissioned from Price Waterhouse. Crucially, the regulator bypassed standard protocol by executing a total shutdown before requiring the findings to be properly tested, verified, or finalized. This aggressive rush to closure occurred despite Price Waterhouse explicitly noting that the draft contained little material fact that was not already known to supervisors. Furthermore, the draft report itself did not recommend a shutdown; the auditing firm would have expected its findings to serve as a diagnostic tool to advance, rather than destroy, the sovereign-backed restructuring plan it was actively helping to develop.
Accountability, Preservation, and Regulatory Disproportionality
Modern enforcement proves that corporate criminal liability can be aggressively pursued while keeping a bank alive under strict surveillance. Material wrongdoing does not make global liquidation inevitable. The BCCI restructuring plan offered the exact same structural remedies later used in the foreign exchange cases: ring-fencing toxic units, installing new leadership, and enforcing rigid regulatory oversight all backed by the sovereign wealth of Abu Dhabi.
The total abandonment of this viable alternative points to a severe double standard, raising critical questions about the Bank of England's regulatory good faith:
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Unilateral Action: Why did the Bank of England abandon an agreed-in-principle rescue plan based on an unverified, confidential draft Section 41 report commissioned entirely behind the backs of the Abu Dhabi stakeholders?
- Denial of Due Process: Why was the principal sovereign shareholder denied a transparent, meaningful opportunity to review the draft findings, counter specific allegations, or adjust their financial commitments before liquidation was triggered?
- Evidentiary Flaws: On what objective regulatory grounds did the Bank of England determine that a fully capitalized, sovereign-backed restructuring plan was suddenly incapable of managing the assets, choosing an immediate, wealth-destroying shutdown over an orderly, supervised transition?
- External Geopolitical Pressure: To what extent did reported US regulatory objections and extra-judicial political motives dictate the sudden timing, secrecy, and severity of the Bank of England's closure strategy?
Conclusion: An Unjustified Distinction
The contrast between these eras cannot be dismissed as a simple evolution of regulatory technique. In the foreign exchange interventions, major Western banks were permitted to plead guilty to systemic, coordinated criminal conspiracies, pay fines, reform their management, and continue their highly lucrative operations. BCCI, possessing a heavily capitalised sovereign rescue package and a structurally identical path to reform, was denied this alternative and subjected to a coordinated, irreversible liquidation.
This disparate treatment cannot be justified by financial evidence alone. The historical record strongly indicates that the Bank of England operated on a parallel track - simultaneously negotiating for Abu Dhabi's capital while secretly orchestrating what appeared to be BCCI's total destruction. This raises the fundamental question of whether the regulatory actions led by the Bank of England against BCCI were guided by objective, proportional banking supervision, or whether external, non-financial considerations deliberately forced an abrupt and inequitable termination.
Also read:
Sources and Further Reading
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US Department of Justice: Five Major Banks Agree to Parent-Level Guilty Pleas, 20 May 2015.
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Federal Reserve: Foreign-Exchange Enforcement Actions, 20 May 2015.
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SEC Commissioner Kara Stein: Dissent Concerning Regulatory Waivers, 2015.
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Report of the Inquiry into the Supervision of the Bank of Credit and Commerce International, chaired by Lord Justice Bingham, October 1992.
Research note
This analysis reflects the documentary record available at the time of writing. Where official records remain subject to information and disclosure requests, the conclusions should be read as provisional and capable of revision in light of new evidence.