Watchdog levies record fines in its final flurry

By GARETH MACKIE
Published on 22/12/2012 00:00

FINES handed out by the City watchdog reached a record £312 million this year as banking giants Barclays and UBS were punished over their part in the manipulation of key benchmark interest rates.

The Financial Services Authority (FSA) is to be scrapped next year following an overhaul of banking regulation, and Richard Burger, partner at City law firm RPC, said the two bodies that replace it could take an even harder line.

From 1 April, the FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority, and Burger said: “My concern is that competition between the new regulators will mean that fines against financial services businesses will rocket even further, harming the City’s international competitiveness.”

The FSA’s previous record of £89m in fines was set in 2010, but that was dwarfed this year following the London interbank offered rate (Libor) scandal, which saw Barclays fined £59.5m in June for “serious, widespread and extended” misconduct in relation to its Libor submissions.

Earlier this week, Swiss banking group UBS was fined £160m – the highest penalty ever handed down by the UK regulator – after its traders colluded with employees at other banks to influence benchmark rates and benefit their trading positions.

Along with Libor, banks have been penalised for the mis-selling of payment protection insurance and FSA figures show that more than £7.5 billion in compensation has been paid out to customers so far.

Burger said: “The FSA will cease to exist next year but it has managed to ratchet up its fines to record levels as it bows out.

“The banks will probably be more nervous about the FSA ordering them to compensate small businesses for interest rate swap mis-selling next year than about further fines.”