Business News Weekly Roundup: May 22 2015

European Central Bank head, Mario Draghi, criticized the European economy at a conference on the unemployment problem in the EU this week saying that “Growth is too low everywhere.”

Draghi is reported in the Economic Times as saying: "Economic conditions have improved somewhat in Europe but growth has not. People in Europe are frustrated by the lack of growth they have witnessed in recent years."

Draghi’s comment comes in spite of the Eurozone posting growth of 0.4% in the first quarter of the year - something which economists believe could bring down the European economy’s 11.3% unemployment rate. The situation across the Eurozone’s member countries, however, is quite varied. Youth unemployment remains as high as 50% in Greece, for instance, and with the country struggling to pay off its debts despite two bailout loans from the EU and the International Monetary Fund, a mooted default could lead to Greece leaving the currency union. This would create huge uncertainties for both the European economy and the global economy.

In an effort to fan the flames on yet more European economic uncertainty, Bank of England chief, Mark Carney, said this week that Britain’s EU referendum should take place “as soon as possible” to deter businesses from halting investments into UK companies until the outcome is agreed.

The BBC has released a damning report into the banking scandal that has rocked the foreign exchange market this week.

Five banks have been charged for manipulating the foreign exchange market and have been ordered to pay a record US$5.7bn in charges. The fines have broken a number of records and are the largest anti-trust fines ever implemented by the US Department of Justice (DOJ).

RBS, J.P. Morgan, Barclays and Citigroup have all pleaded guilty to US criminal charges while UBS will plead guilty to rigging benchmark interest rates. Out of this group, Barclays will be fined the most for failing to join other banks in settling negotiations in November – the bank is also sacking eight employees involved with the scandal.

Traders are accused of using chatrooms to manipulate foreign exchange market prices in their favor. One blatant message to a trader, and released to the press, came with the thinly-veiled threat: “Mess up and sleep with one eye open at night.”

Foreign market exchange prices were also being influenced around the daily fixing of currency levels at 4pm. This is when a daily exchange rate fix is established to help investors value their assets and liabilities. During this time certain employees would amass a large portion in currency and, just before the fix, would exit that position, thus leaving others – who were aware of the scheme – able to profit from the fixing.

New York’s superintendent of financial services Benjamin Lawsky said: "They engaged in a brazen 'heads I win, tails you lose' scheme to rip off their clients.”