(Bloomberg) -- Bank of America cut third- quarter earnings by $400 million, wiping out the surprise profit it reported last month, as the firm braced for the end of probes into foreign-exchange dealings.

U.S. regulators faulted systems and controls for currency trading and called for fines and remedial actions in draft documents sent late last month, the firm said yesterday in a quarterly report. The lender posted a loss of $232 million, or 4 cents a share, for the three months ended Sept. 30.

Regulators in the U.K. and U.S. are preparing to levy fines on at least a half dozen firms after probing allegations they manipulated the $5.3 trillion-a-day currency market, people with knowledge of the situation have said. The reviews, including scrutiny of traders’ communications and how firms policed their activities, have prompted the world’s biggest banks to overhaul operations and bolster legal reserves.

“The attributes that make a strong currency trader is someone who’s aggressive and takes advantage of opportunities,” said Mark Williams, a former Federal Reserve bank examiner who’s now a lecturer at Boston University’s School of Management. “If controls are weak or not enforced properly, they’ll take advantage of weaknesses in the system.”

The probes have meant another legal headache for Bank of America Chief Executive Officer Brian T. Moynihan, 55, after he led the firm through more than $70 billion in costs tied to the takeovers of Countrywide Financial and Merrill Lynch. Those cases culminated in a record $16.7 billion settlement of government mortgage probes in August. He has presided over five quarterly losses since taking the top job in 2010.


Authorities on three continents have been looking into allegations that dealers at the biggest banks traded ahead of clients and colluded to rig the WM/Reuters rate, a benchmark used by pension funds and money managers to determine what they pay for foreign currencies. More than 25 traders have been fired, suspended or put on leave after the allegations became public last year, and disclosures from banks in the past two weeks show a wave of settlements is approaching.

Bank of America said yesterday that talks accelerated after it reported quarterly results in mid-October. The firm is in advanced discussions with the Fed and U.S. Comptroller of the Currency, a person briefed on the matter said, requesting anonymity because the negotiations are private.


The company is cooperating with investigations and inquiries, “some of which are likely to lead to regulatory or legal proceedings and expose the corporation to material penalties, fines or losses, and could adversely affect its reputation,” Bank of America said in the filing.

The U.K. Financial Conduct Authority is preparing to levy fines ranging from 225 million pounds ($358 million) to 250 million pounds against six other banks in the first settlements from its probes as soon as next week, three people with knowledge of the talks said yesterday.

Citigroup revealed last week that it’s facing a criminal probe into its foreign-exchange operations, paring third-quarter profit by $600 million.

JPMorgan Chase and Zurich-based UBS AG also have disclosed criminal inquiries by the U.S. Justice Department into those businesses. Bank of America hasn’t said whether its investigations include a criminal inquiry.

Bank of America, the second-largest U.S. lender, previously said it had $5.6 billion in third-quarter legal expenses, according to an Oct. 15 presentation, with almost 90% attributed to the mortgage settlement. The Charlotte, North Carolina-based firm had posted a quarterly profit of $168 million before yesterday’s disclosure.

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