Charlie Chaplin's signature bowler hat is pictured at a preview of actress Debbie Reynolds' Hollywood costume and prop collection in Beverly Hills
Bankers Accused of Libor and FX Fixing Are \'Scapegoats\' Going Unheard REUTERS/Fred Prouser

First we had the Libor interest rate scandal that led to banks paying billions of dollars in fines; now we have recurring, and possibly even more damaging, allegations of foreign exchange rate-fixing.

Dozens of bank traders have been suspended or fired amid firms' internal investigations into the market, and reports now claim that a probe could be opened in the coming days.

Six of those accused of conspiracy to defraud over alleged attempts to manipulate Libor.

But are some of the victims of this appalling situation actually going unnoticed?

Back in February, Martin Wheatley, the head of the Financial Conduct Authority (FCA), told MPs that the new FX rate claims were "every bit as bad" as Libor.

Then in March, the Governor of the Bank of England, Mark Carney, went further, labelling the allegations "serious as Libor, if not more so". He told MPs that ensuring the probity of foreign exchange rates was "incredibly important" for the currency market.

Now, the forex probes at the Serious Fraud Office and the City watchdog, the FCA, look certain to form the basis of a criminal investigation.

Broken Trust

The FX Market

The daily $5tn (£3.1tn, €3.7tn) currency market is the largest in the financial system and is pegged to the value of funds, derivatives and products.

Morningstar estimates that $3.6tn in funds, including pension and savings accounts, track global indexes.

FX rates are calculated and compiled by using data from a variety of submitted provisions on a number of platforms, such as ThomsonReuters.

It is then calculated by WM, a unit of State Street, to form WM/ThomsonReuters at 1600 GMT daily.

It goes without saying that at the root of successful trading is trust. Once that has gone, the damage can be incalculable to financial organisations.

It's fair to say then that when so much is at stake and so many reputations are on the line, scapegoats can often be hastily sought, sacrificing smaller components in order to protect the integrity of the greater whole.

Indeed, away from all the sustained hand wringing that's been going on in the public eye, perhaps some of the victims of this latest situation are not being counted.

As employment law specialists, we have advised individuals who have been directly accused of wrongdoing in relation to Libor and FX.

Time and again the story has the same features.

The employees concerned had no formal training about manipulation of the markets; historically they were financially rewarded for producing profits as a result; there was no formal separation of roles – indeed the Libor setter was often sitting on the same desk as the trader - and the employee took their lead from their managers who were amply rewarded for what they did.

There are plenty finding themselves in the same boat again when it comes to FX; the unfolding scandal has so far seen dozens of traders placed on leave, suspended or fired by some of the world's biggest banks.

Court of Public Opinion

Those that we have seen have understandably wanted to fight back at their disciplinary hearings to try and clear their name and as has been the case on more than one occasion, return to work, perhaps with a warning.

What is Libor?

The London Interbank Offered Rate (Libor) is a lending rate that is set by a panel of banks.

Libor valuations directly influence the value of trillions of dollars of financial deals between banks and other institutions.

The benchmark reference rates are used in euro, US dollar and British sterling over-the-counter (OTC) interest rate derivatives contracts and exchange traded interest rate contracts.

However, the individuals involved are typically aware that public opinion is against them and that their reputation will be exposed regardless of whether or not they win.

They also know that the banks have their backs against the wall on this issue and so cannot be seen to be soft.

This might be the state of public perception, where the only thing worse than the banks are the bankers themselves; but when people who are not truly culpable are made to take the hit for those who are, the courts can be expected to step in, regardless of the current mood.

Commentators love to make grand statements about "unelected judges" making unpopular decisions, but it is precisely because they are unelected that they have freedom to do what is right rather than what the baying mob want to see.

That is what we will be inviting them to do.

We all know that greater transparency must be promoted to prevent future abuses of Libor and FX.

However, closer attention must also be paid to those paying the heaviest personal prices, and who should really be carrying the can across the banking world.

That is a fundamental element of cleaning up so many tattered reputations.

Gareth Brahams is a partner at employment law specialist firm BDBF.