The Financial Conduct Authority (FCA) is to review its fines policy after the soaring level of penalties given to banks by the regulator has tripled in a year.
The FT reports that the FCA have hit record levels after the forex investigation and Libor interest rate benchmarks and has given out around £1.4bn in penalties since April 2014. This amount is more than triple the £425m levied in the whole of 2013-2014 financial year and almost all of this year’s total is due to the £1.1bn of fines paid to the FCA by five banks who attempted to rig the foreign exchange market.
According to the FT, fines have also increased because of the effects of a new penalty regime that allowed higher fines for wrongdoing since 2010. The record breaking total comes amid concerns that City scandals and subsequent fines are affecting the banks’ capital. Andrew Bailey (Deputy Governor, Bank of England) believes that authorities around the world should better co-ordinate their penalties.
The FCA figures were presented during the financial authority’s enforcement conference last week and during a keynote FCA Director, Georgina Philippou said: “This is not a penalties race. We are not competing against any other regulator in the world.”
Philippou also revealed plans for the watchdog to review how well the new regime is working. “We believe that we now have enough cases to pause and take stock and we plan to start a review of our penalty policy in the next financial year.”
The current policy gives the FCA the authority to act as a deterrent by increasing fines. The watchdog increased fines during the forex findings because they had not learnt lessons from the 2012 Libor investigation which uncovered the manipulation of interbank offered lending rates by multiple banks to leverage interest rates for profit. Regulators in the UK, US and EU fined banks more than $6bn for rigging the interest rates.
Last week, UK Chancellor George Osborne said that the fines from the forex investigation would be used to boost GP services within the NHS by £1.2bn and Libor fines which have reached around £500m in the UK, would be used to pay for military services.
According to the FT, the scale of the Libor and forex investigations have impacted the watchdog’s ability to open new cases and penalise individuals. Only nine individuals have been sanctioned by the FCA during 2013-2014 for a total of £2.2m compared to 19 people and £3.9m paid last year. Philippou said: “In some instances firms need to be held to account because of the failings of corporates, as well as individuals. While it is true that individuals are responsible for their actions, they don’t operate within a vacuum; they operate within the culture and values of the firms that employ them.”
By Nicole Miskelly, bobsguide Lead Journalist