JPMorgan, UBS, Barclays, Citigroup and RBS have been fined $5.7 billion in the US for charges including manipulating the foreign exchange market.
Four of them – JPMorgan, Barclays, Citigroup and RBS – have agreed to plead guilty to US criminal charges.
UBS will plead guilty to rigging benchmark interest rates.
Barclays was fined the most, $2.4 billion, as it did not join other banks in November to settle investigations by UK, US and Swiss regulators.
The bank is also sacking eight employees involved in the scheme.
US Attorney General Loretta Lynch said that “almost every day” for five years from 2007, currency traders used a private electronic chat room to manipulate exchange rates.
Their actions harmed “countless consumers, investors and institutions around the world”, Loretta Lynch said.
Separately, the Federal Reserve fined a sixth bank, Bank of America, $205 million over foreign exchange-rigging. All the other banks were fined by both the Department of Justice and the Federal Reserve.
Regulators said that between 2008 and 2012, several traders formed a cartel and used chat rooms to manipulate prices in their favor.
One Barclays trader, who was invited to join the cartel, was told: “Mess up and sleep with one eye open at night.”
Several strategies were used to manipulate prices and a common scheme was to influence prices around the daily fixing of currency levels.
A daily exchange rate fix is held to help businesses and investors value their multi-currency assets and liabilities.
Until February, this happened every day in the 30 seconds before and after 16:00 in London and the result is known as the 4pm fix, or just the fix.
In a scheme known as “building ammo”, a single trader would amass a large position in a currency and, just before or during the fix, would exit that position.
Other members of the cartel would be aware of the plan and would be able to profit.
The fines break a number of records. The criminal fines of more than $2.5 billion are the largest set of anti-trust fines obtained by the Department of Justice.
Meanwhile, the $925 million fine imposed on Citigroup by the Department of Justice was the biggest penalty for breaking the Sherman Act, which covers competition law.
The guilty pleas from the banks are seen as highly significant as banks have settled previous investigations without an admission of guilt.
The Attorney General warned that further wrongdoing would taken extremely seriously: “The Department of Justice will not hesitate to file criminal charges for financial institutions that reoffend.
“Banks that cannot or will not clean up their act need to understand – it will be enforced.”
The US Federal Deposit Insurance Corporation (FDIC) has sued 16 banks for allegedly manipulating the London interbank offered rate (LIBOR).
The LIBOR rate is used to set trillions of dollars of financial contracts, including mortgages and financial transactions around the world.
The regulator said the manipulation caused substantial losses to 38 US banks which were shut down during and after the 2008 financial crisis.
The sued banks include Barclays, HSBC, Citigroup and Royal Bank of Scotland.
The British Bankers’ Association (BBA) has also been sued by the FDIC.
“BBA participated in the alleged scheme to protect the revenue stream it generated from selling Libor licenses and to appease the Panel Bank Defendants that were members of the BBA,” it was quoted as saying by the AFP news agency.
The FDIC has sued 16 banks for allegedly manipulating the LIBOR
The FDIC alleged that the banks mentioned in its lawsuit rigged the rate from August 2007 to at least mid-2011.
Other banks named in the lawsuit include Bank of America, JPMorgan Chase, Deutsche Bank, Lloyds Bank, Credit Suisse, UBS, and Rabobank.
LIBOR is the average rate at which banks lend money to one another and is decided on a daily basis.
Most of the world’s biggest banks contribute estimates to form the LIBOR.
But there have been allegations that some have looked to profit from it by understating or overstating their submissions.
Over the past two years, regulators across the globe have been investigating the manipulation of the rate and there have been $3.7 billion in fines to date.
A string of international banks and brokers have faced both criminal and civil penalties for their involvement in the scandal.
Some banks have also been found to have understated their submissions in the period during and after the financial crisis.
Citigroup has agreed to pay $395 million to Freddie Mac to settle claims of potential flaws in mortgages it sold to the firm.
The sum covers nearly 3.7 million loans sold to Freddie Mac between 2000 and 2012.
It is latest in a series of settlements by US banks with agencies Freddie Mac and Fannie Mae – bailed out by the government during the financial crisis.
The two have claimed that banks sold them toxic debts and as a result should be responsible for the losses on them.
“Today’s agreement with Freddie Mac marks another important milestone in successfully resolving Citi’s remaining legacy mortgage issues,” Jane Fraser, chief executive of CitiMortgage, said in a statement.
Tom Fitzgerald, spokesman for Freddie Mac said the agreement was an “equitable one” and “allows both companies to move forward”.
Citigroup has agreed to pay $395 million to Freddie Mac to settle claims of potential flaws in mortgages it sold to the firm
In the run-up to the financial crisis of 2007-08, the US witnessed a big boom in its housing market.
The boom saw banks grouping together home loans and selling them as investments, including to firms such as Freddie Mac and Fannie Mae.
But as the housing market collapsed and financial crisis spread many of the underlying mortgage holders were unable to repay their debts.
As a result, the investments plummeted in value, with disastrous consequences for banks all over the world.
Freddie Mac and Fannie Mae lost more than $30 billion, partly because of their investments in the subprime mortgages, and had to be bailed out by the US government.
Since then, banks have been under pressure to resolve claims on potentially faulty mortgages sold to the two firms.
Citigroup announced a deal in July to pay Fannie Mae $968 million for loans over a similar period.
In January, Bank of America agreed to pay Fannie Mae $11.6 billion to settle claims relating to residential home loans.