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US Regulators Step Up Forex Settlement Talks

Authorities in the US are attempting to reach settlements within weeks with a host of global banks over their attempted manipulation of foreign exchange markets.

Sky News has learnt that Barclays (LSE: BARC.L - news) will next week more than double its existing financial provision for forex wrongdoing after it took a £500m charge during the course of last year.

Barclays had agreed the parameters of a settlement with the UK Financial Conduct Authority (FCA) and the Commodity Futures Trading Commission (CFTC) in the US.

However, it excluded itself from a broader settlement between those regulators and six banks in November in order to secure a binding agreement with all relevant authorities, insiders said at the time.

Sources said that Barclays' decision to substantially increase its provision for forex fines indicated that a deal could be announced within weeks.

Talks between some of the banks and the US Department of Justice had accelerated since the start of the year, one regulatory source said.

HSBC this week set aside $550m (£357m) for further penalties after paying approximately £395m in fines last year, while Royal Bank of Scotland (LSE: RBS.L - news) also used its full-year results on Thursday to add to its bill for control failings in its forex operations.

RBS also suspended a further two traders this week as the investigation into the market continues.

A settlement involving the Department of Justice, the New York State Department of Financial Services and other regulators could come as soon as the end of March, according to insiders.

For Barclays, an overall settlement costing more than £1bn would top some analysts' estimates but would draw the line under a lingering regulatory hurdle for the bank.

Sky News revealed last week that Barclays, led by Antony Jenkins, chief executive, would slash its bonus pool for 2014 despite an anticipated rise in profits.

Last year, the bank became the target of renewed criticism from investors for increasing payouts to staff after profits fell, a situation Mr Jenkins is determined to avoid repeating.

Six banks - Bank of America, Citigroup (NYSE: C - news) , HSBC, JP Morgan, RBS and UBS - were fined more than $4bn last year for their roles in the forex-rigging scandal,

Martin Wheatley, the FCA chief executive, said at the time that a large proportion of the fines was a consequence of misconduct by foreign currency traders having taken place after the Libor rate-rigging scandal was exposed in the summer of 2012.

The so-called omnibus settlement was the largest collective penalty ever imposed by the City watchdog and exposed lurid details of traders acting as cartels nicknamed 'the 3 musketeers' and 'the players'.

Last week, Bank of New York Mellon also made a substantial financial provision in its results for forex-related fines.

At HSBC, forex traders faced a disproportionate hit to their 2014 bonuses because of the fines imposed on the bank, with their variable pay cut by nearly 40% compared to a 7% overall cut in the bonus pool.

Later this year, a review launched by George Osborne, the Chancellor, will make recommendations for improving the integrity of the City's financial markets.

Barclays declined to comment.