Premium financial service providing companies like HSBC Holdings plc (HSBC) and The Royal Bank of Scotland Group plc (RBS) are anticipated to lower their bonus pools, after clearing the fines for the alleged exploitation of foreign exchange rates. The banks would lower bonuses to caution investors against risky activities.
In order to tap greater economic surplus, many prominent global banks resort to foreign exchange manipulation activities, in violation of the rules imposed by several regulatory authorities. Hence, currency market rigging is not new to the banking industry. Famous financial institutions such as HSBC Holdings and Royal Bank of Scotland have been charged heavy fines for manipulating foreign exchange rates. However, recently, such penalty expenses have compelled the companies to consider lowering their bonus pools in the near future.
Annual bonus has been an important determinant of profit for most bankers. As a result, anticipation of lower bonus pools from HSBC Holdings and Royal Bank of Scotland would soon disappoint investment bankers and traders. Moreover, a trend of depreciating bonus pools persists in certain other prominent financial institutions as well. Bonus pools of important institutions like Deutsche Bank AG (DB) and Barclays PLC (BCS) have also contracted due to weaker fixed-income trading profit and compensation of the European Unions’ capital.
In Nov 2014, HSBC Holdings, Royal Bank of Scotland, JPMorgan Chase & Co. and many other investment banking companies together agreed to pay $4.3 billion to settle the charges of currency rigging. Thus, in order to avoid any such fines and regulatory obligations in future, these premium banks are expected to reduce their bonus pools. This will serve as a warning to the traders for avoiding currency-rigging operations and investing in less risky investments.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment