By Mark Kleinman, City Editor
Some of Britain's biggest banks will set aside hundreds of millions of pounds in the next few weeks as they prepare to settle with regulators after a probe into the manipulation of foreign exchange markets.
Sky News has learned that Barclays, HSBC and Royal Bank of Scotland (RBS) are all preparing to allocate substantial provisions ahead of a prospective deal with the Financial Conduct Authority (FCA).
Insiders said that at least one of the banks was likely to set aside a much higher figure than its anticipated FCA fine amid ongoing discussions with authorities in the US.
They added that the foreign exchange probe would see well over £500m set aside by the three banks in aggregate when they report third-quarter results within the space of a few days at the end of the month.
The provisions, which will follow similar moves this week by Citigroup and JP Morgan, follow crunch talks held between the banks and the FCA in September.
Sky News exclusively revealed details of those discussions, although sources said the aggregate penalty for the six banks in settlement talks was likely to be lower than the £2bn indicated at the time.
The so-called omnibus settlement, which the banks have been keen to coordinate with the FCA, will be the largest group penalty ever imposed by the City watchdog.
The FCA will find the banks guilty of a string of systems and control failures in their foreign exchange businesses following the emergence of concerns that currency markets had been manipulated in a similar way to interbank borrowing rates such as Libor.
The six banks, which also include UBS, are likely to finalise their settlement with the FCA by the end of next month, although the timetable could slip.
One executive said the fact that the regulator had indicated the scale of potential fines meant they were under pressure from auditors to set aside provisions in their third-quarter numbers.
The UK banks are still discussing internally whether to top up their warchests for regulatory settlements to encompass other national regulators as well as the FCA.
One source said at least one major British lender would also increase its compensation tab for mis-selling payment protection insurance in the coming weeks.
Barclays, HSBC and RBS declined to comment.
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