The age of multibillion-dollar bank fines with no admission of wrongdoing is over. The Justice Department announced Wednesday morning that five banks pleaded guilty to market manipulation, while also paying billions of dollars in fines.
Barclays, Citigroup, J.P. Morgan and the Royal Bank of Scotland admitted to illegally distorting foreign exchange markets. The banks formed what they called "The Cartel" and aimed to set a key currency marker, known as "the fix," at mutually beneficial values.
The fix is set every day at 4 p.m. London time and is used in the more than $5 trillion currency market to determine the price of trades and the value of large institutional holdings. Traders at the banks used instant messaging chat rooms to discuss where to set the fix.
In addition to admitting guilt, the banks will also pay fines. Barclays will pay $650 million, Citigroup $925, million J.P. Morgan $550 million and RBS $395 million. Barclays will pay another $1.3 billion to New York State, federal and U.K. regulators.
The Justice Department said it was charging the banks' parent companies because the wrongdoing was pervasive, and that the banks' punishment was "fitting considering the long-running and egregious nature of their anticompetitive conduct." To put the fines in context, in 2014, Barclay's net income was $3.5 billion, Citigroup's was $7.3 billion, J.P. Morgan's was $21.8 billion and RBS' was $3.9 billion.
A fifth bank, UBS, pleaded guilty to manipulating the London Interbank Offered Rate, which is called Libor. Libor is the most important international interest rate benchmark. UBS will pay $545 million in fines to the Justice Department and Federal Reserve. The value of more than $300 trillion in debt is tied to Libor.
The five banks will pay a further $1.6 billion in fines to the Federal Reserve.
This story has been updated to include more information from the Justice Department and the 2014 income of the banks mentioned.