Financial Conduct Authority hopes £1.5bn in fines will change behaviour

The City watchdog has hit financial firms with nearly £1.5bn of penalties so far this year – more than three times the record level of fines it levied in 2013.

With more than a month until the end of 2014, last week’s £42m fine against Royal Bank of Scotland for its computer meltdown in 2012 took the penalties on banks, other companies and individuals to £1.47bn – up from £474.3m for all of last year.

This year’s figure was boosted by £1.1bn of penalties this month against banks that manipulated foreign exchange markets. Each of the fines imposed on Royal Bank of Scotland, Citibank, JP Morgan and UBS was a record for the regulator, the Financial Conduct Authority.

Tracey McDermott, the FCA’s head of enforcement and financial crime, said: “We don’t set ourselves targets for the number of fines we will issue in a given period. What we look at is whether the sanctions we do impose are having an impact on behaviour. In all cases we seek to use the approach which we believe will be most effective in driving up standards.”

McDermott said fines were part of the FCA’s wider effort to clean up the City including tougher vetting of those in senior people, closer supervision of firms and stricter rules.

Rachel Couter, a partner at the law firm King & Wood Mallesons, said the figures showed the FCA was taking a tougher line, particularly with repeat offenders and companies that made big money from their wrongdoing.

“The recent foreign exchange fines clearly dwarf any of the other fines imposed this year. But there have been a number of other significant fines, particularly of institutions that have earned a lot of revenue from the business area where the breaches occurred.

“What is also clear is that the FCA is losing patience with repeat offenders and similar breaches across multiple entities.”

Couter listed State Street’s payment of almost £23m for overcharging clients, more than £30m imposed on HomeServe for insurance mis-selling and two fines totalling £64m on Barclays for failing to protect client assets and prevent manipulation of the gold price.

Barclays decided not to settle with the FCA over accusations of foreign exchange rate rigging because it was still in talks with a US regulator over the affair. The FCA is likely to hit the bank with a huge fine next year.

The number of fines in 2014 is down to 40 from 48 for all of 2013 as penalties against individuals have dropped to 13 from 20.

Couter said the FCA reached agreements with firms before punishing the employees responsible and that she expected more fines on individuals to come through next year.

The FCA’s chief executive, Martin Wheatley, has taken a harder line than the FCA’s predecessor, the Financial Services Authority (FSA), which was criticised for being a cheerleader for the City.

The FSA’s total tally for 2007 as the financial crisis began to unfold was £5.3m.

This year’s record total gives the chancellor, George Osborne, a windfall after he changed the rules to funnel FCA fines to the Treasury. Ed Balls, the shadow chancellor, has called for Osborne to spend the money on the NHS.

Powered by article was written by Sean Farrell, for The Guardian on Sunday 23rd November 2014 16.55 Europe/London © Guardian News and Media Limited 2010


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