Traders are understood to have been suspended at Royal Bank of Scotland (RBS) and Barclays in connection with the possible fixing of currency markets as a global investigation widens.
Reports suggest Barclays has suspended as many as six foreign exchange traders and that RBS has put at least two of its traders on suspension as part of the probe involving regulators in the UK and worldwide.
Both banks declined to comment on the suspensions but they have confirmed they are part of the investigations.
RBS said in its third quarter results yesterday it had been contacted by the UK’s Financial Conduct Authority (FCA) and other authorities. It added: “The group is reviewing communications and procedures relating to certain currency exchange benchmark rates as well as foreign exchange trading activity and is cooperating with these investigations.
“At this stage, the group cannot estimate reliably what effect, if any, the outcome of the investigation may have on the group.”
RBS chief executive Ross McEwan refused to comment on the case but said the bank would “come down very severely on anyone we discover has been breaking the rules”.
Fellow banking giant Barclays said alongside its latest trading update that it was also co-operating with inquiries from various authorities and was reviewing its foreign exchange trading activities over a period of several years to August this year.
Citigroup, Deutsche Bank and UBS are likewise thought to have been contacted as part of the probe involving regulators in the UK, Switzerland, the US and Hong Kong.
The FCA revealed last month it had launched its own investigation into the foreign exchange market, which is worth £3trillion a day globally.
It said it first sent out letters to firms in April before launching a formal investigation later.
Regulators are looking into whether currency traders shared information about their positions and knowledge of client orders through instant messages to rig the foreign exchange market in their favour.
Currency exchange rates are set on a daily basis by analysing actual trading volumes at leading banks during a short time window.
It is thought that traders could potentially influence exchange rates by pushing through large orders during the 60-second window to make a profit.
Even a small movement in exchange rates could affect the value of investments worldwide, including pension funds.
It threatens to engulf the banking industry in yet another embarrassing episode at a time when many financial firms are still battling to restore their reputations following the Libor inter-bank rate rigging and payment protection insurance mis-selling scandals.