Value of fines imposed by City's financial regulator drops 40%

The value of fines imposed on City firms and individuals has fallen by almost 40% this year, with a marked slowdown in the last six months of the year.

The £905m of fines by the Financial Conduct Authoritydown from a record £1.5bn in 2014 – is almost double the £474m for 2013, previously the second biggest year.

Lawyers were divided over whether this meant the FCA was taking a more lenient approach after the sudden departure of the chief executive, Martin Wheatley, which was announced in July when the chancellor did not renew his contract.

“There is a view in the market that the atmosphere has changed since the election. Martin Wheatley was very focused on where he perceived to see poor behaviour and his departure may see a change in approach including a reduction in fines. On this view the fall off in fines is possibly an indication of this already,” said Peter Snowdon, partner at Norton Rose Fulbright.

But Marcus Bonnell, regulatory counsel at the law firm RPC, said: “Clearly the financial services industry cannot breathe a sigh of relief.” He pointed to record fines imposed for certain rule breaches, such as the £72m levied on Barclays for potentially facilitating financial crime through an “elephant deal”.

The 2014 tally was bolstered by the £1.1bn of fines for rigging foreign exchange markets imposed on major banks. Swiss bank UBS received the biggest fine, at £233m, followed by the Citibank and JP Morgan in the US, which were fined £225m and £222m respectively. Bailed-out Royal Bank of Scotland was fined £217m and HSBC £216m.

But there was a marked slowdown in the second half of this year with only 15 fines worth a total of £80m. In the first half of 2014 there were 24 fines worth £1.3bn.

The reduction means George Osborne has less to spend on good causes, after he changed the law in 2012 following the outcry caused by the fine imposed on Barclays for Libor rigging. Until then, the fines went back to the regulator to reduce the annual levy paid by firms to fund the regime.

During 2015, Barclays was fined twice, not only for the elephant deal that might have been used to facilitate finance crime, but also £284m for rigging foreign exchange markets. It was not part of the settlement with other banks in 2014 and was handed a record fine for rigging the currency market.

Another bank to receive a record fine was bailed-out Lloyds Banking Group, which had a £117m penalty imposed for mishandling payment protection insurance claims.

RPC said the proportion of fines the FCA levied against individuals this year rose to 51%, up from 33% in 2014. There were 21 fines against individuals this year compared with 13 in 2014. There were six fines for market abuse, up from two in 2014.

Bonnell said: “By imposing more than half of all fines against individuals the FCA is demonstrating that financial services workers will be directly accountable for their actions.”

The FCA has not yet taken action against any of the individuals involved in rigging foreign exchange markets while any criminal actions are considered. The Swiss authorities, however, on Thursday announced a series of measures against six former UBS employees for rigging currency and precious metals markets.

The local regulator, Finma, said it had imposed bans of between one and five years on the individuals, who were not named. Eleven individuals had originally been investigated and proceedings against one are continuing.

“While four enforcement proceedings were discontinued in August 2015, Finma proceeded with a further six, coming to the conclusion that those concerned bore significant responsibility for the serious organisational shortcomings and improper conduct at UBS,” the regulator said.

Powered by article was written by Jill Treanor and Sean Farrell, for on Thursday 17th December 2015 13.35 Europe/ © Guardian News and Media Limited 2010


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