Bank of America, one of the world’s largest banks, is bemoaning that it will suffer a loss of US$232 million for the third quarter.
The amount said to be related to legal costs surrounding a global investigation into the foreign exchange trading practices of a number of major banks, Bank of America included. The foreign exchange market is a US$5.3 trillion a day market but is also one of the least regulated of all markets.
This might seem like a lot of money for “legal costs” but the fact is that this bank was forced to add US$400 million to its legal reserves due to the settlements they were expected to pay out. BoA representatives did however mention that they were “in advanced discussions with U.S. regulators to resolve [these] matters[.]”
But the United States may be the least of the huge banks problems, as there are concurrent investigations ongoing in both Europe and Asia concerning similar issues. According to the New York Times, there was no mention of which regulators will be contacted in these regions, if any. Investigations have been ongoing since the middle of 2013 and regulators have been going over evidence that traders working for these banks manipulated rates for 160 different currencies.
In the United States, there are several federal agencies involved in the investigation. Including the Department of Justice, Commodity and Futures Trading Commission, and the Federal Reserve. Great Britain has its Financial Conduct Authority overseeing the investigation and there are several other European agencies involved as well.
Bank of America is not the only bank with similar problems. Citigroup Inc. announced that it would be setting aside even more money, US$600 million, to cover the costs of the inquiries, and the list goes on to include such financial powerhouses as HSBC Holdings Plc. JP Morgan Chase & Co., Deutsche Bank Ag and the Royal Bank of Scotland. In Britain six major banks are under investigation for collusion and manipulation of the foreign exchange market.
But Bank of America’s complaints are interesting to say the least. According to the Wall Street Journal the Banking industry is more profitable than it has ever been, posting the highest second quarter profits in 23 years, up more than 25% from the previous quarter, a large portion of which belonged to BofA.
Bank profits, according to Forbes magazine, totaled US$34.5 billion, up US$5.9 billion. Keep in mind that these are net, not gross profits. The Federal Deposit and Insurance Corporation (FDIC) said that at least 7,000 commercial banks and savings institutions have adapted to the new regulatory climate “amid a slow-growth environment" and learned how to completely milk this system. Bank of America alone saw a second quarter net income of US$2.3 billion on revenue of US$22 billion.
Finally, consider this. There is approximately US $5 trillion being traded back and forth between banks. This means that those trillions are not in the economy. They are not being loaned out to people to buy homes and begin new businesses or finance education.
The cash being deposited by businesses and individuals is being taken out of circulation by banks more interested in trading than servicing their customers. If even a portion of this money was resting in digital wallets, whose private keys were controlled by individuals, this money would still be in circulation where it is needed most.
Did you enjoy this article? You may also be interested in reading these ones:
Bet on Gold price with Bitcoin and earn in 60 seconds, no account required! UpDown.bt
The amount said to be related to legal costs surrounding a global investigation into the foreign exchange trading practices of a number of major banks, Bank of America included. The foreign exchange market is a US$5.3 trillion a day market but is also […]
Testing of Bakkt’s Bitcoin futures contracts starts today as the ICE-backed startup is trying out the underlying infrastructure to see… Read More
U.S. Treasury Secretary Steven Mnuchin has once again weighed in on bitcoin, claiming the U.S. dollar has not been used… Read More
According to a survey produced by financial services firm BankRate, Bitcoin and crypto do not represent a popular choice of… Read More
Despite facing multiple long delays, the highly anticipated Bakkt Bitcoin futures platform has finally began testing, and many analysts are… Read More
Robinhood's $323 million fundraising haul values the trading app at $7.6 billion. But it's still worth less than Bitcoin exchange… Read More
Binance CEO says there's no influx of institutional investors in bitcoin and other crypto tokens, but reports say otherwise. |… Read More