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US on track to reach deals on forex rigging as soon as May

[NEW YORK] US authorities are on course to reach multi-billion-dollar agreements with five major banks over allegations of foreign exchange market rigging as soon as the second half of May, people familiar with the matter told Reuters on Friday.

Talks between the banks and the US Department of Justice are at an advanced stage, and the collective settlement may well exceed the US$4.3 billion in fines paid by a half-dozen banks to US, UK and Swiss regulators last November.

The banks or units of them also are likely to plead guilty to criminal charges, sources said. Which entities will plead and the exact charges are still in flux, although one person said antitrust violations are probable.

The five banks are JPMorgan Chase & Co, Citigroup , British banks Royal Bank of Scotland and Barclays and Swiss bank UBS.

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The agreements would resolve probes of how traders manipulated the largely unregulated US$5-trillion-a-day foreign exchange market. Transcripts of online chat rooms made public in November show how traders shared confidential information about client orders and otherwise conspired to benefit their own transactions.

Peter Carr, a spokesman for the Justice Department, declined to comment.

RBS and Barclays this week set aside a further US$1.71 billion for investigations and litigation involving foreign exchange. RBS's US$510 million brought its total FX provision to US$1.1 billion and Barclays' additional US$1.2 billion raised its total to US$3.2 billion.

UBS could set aside more for possible fines or settlements when it reports first-quarter results on Tuesday.

In its first-quarter earnings report this week, RBS said settlement discussions with the DOJ and "certain other financial regulatory authorities" are at an "advanced" stage. Chief Executive Ross McEwan said he expected a resolution with the DOJ some time in the second quarter.

Barclays pulled out of November's coordinated global settlement due to issues with the New York Department of Financial Services, the state banking regulator headed by Benjamin Lawsky.

Barclays may agree to a partial settlement with the New York regulator this month, but last week Lawsky said the agency was not ready to resolve its investigation of the British bank's automated trading platform.

The four other banks involved in talks with the Justice Department are not licensed or regulated by the New York agency.

Barclays also is likely to settle separate probes by Britain's Financial Conduct Authority and the US Commodity Futures Trading Commission about the same time as it completes the Justice Department deal, a person familiar with the matter told Reuters. Both the FCA and CTFC declined to comment. The four other banks came to terms with those authorities in November.

A Barclays executive said Wednesday the bank wants to resolve the probes as "expeditiously" as possible, but a spokeswoman otherwise declined to comment.

The US Federal Reserve also is expected to extract penalties as part of the latest settlements with the banks, sources said. A spokesman for the agency declined to comment.

While the punishments will sting harder than expected and more than they did in November, they won't signal an end to the FX rigging scandal. US authorities are still expected to continue investigations into whether the computer programmes banks use for forex trades are rigged in favour of them over clients.

The US Justice Department and Britain's Serious Fraud Office also have opened cases against individuals, which could take years to be resolved.