Misconduct allegations surrounding foreign exchange trading are “every bit as bad” as the Libor rate-rigging scandal, the head of the City regulator told MPs yesterday.
At least ten banks have been drawn into a major investigation launched last autumn by the Financial Conduct Authority (FCA), the Treasury select committee was told.
FCA chief executive Martin Wheatley also said it was investigating a range of benchmark rates operating in London.
Banks have been fined billions of pounds by regulators in the UK, Europe and the US for trying to fix such rates, including Libor, and Barclays chief executive Bob Diamond quit after the scandal emerged in 2012. Criminal action has also been launched by the Serious Fraud Office.
Last October, the FCA said it had joined other international regulators in scrutinising firms over potential manipulation of the £3 trillion-a-day forex market. Wheatley said: “The allegations are every bit as bad as they have been with Libor.”
He added that, given the allegations, there was a lack of trust in the way such rates were fixed – though the FCA was putting in place new standards.
Wheatley said ten banks had come forward with information in the light of the forex probe, though the regulator itself had not named those involved.
He said further investigations had not been made public, but told MPs: “There are a number of other benchmarks that operate in London that we are investigating because of concerns that are being raised with us.”
Benchmark rates are used for tens of trillions of dollars-worth of loans and transactions around the world and are calculated using submissions from panels of banks about the rates at which they believe they can borrow every day.
Meanwhile, Wheatley agreed that bonuses for Lloyds senior managers should be cut in the wake of a record £28 million fine over incentive schemes that drove mis-selling. He told MPs the body was still going through pay-outs for this year so he could not comment in detail on how this should be done.
But he agreed with MP Jesse Norman when asked whether there ought to be a “meaningful deduction from the bonus pool”.
Wheatley said: “The whole concept is that those people involved in the decision-making should suffer the consequences of our subsequent enforcement action.”
He was also questioned by MPs over the appointment of Paul Flowers at the troubled Co-op bank and told them it could not happen again.
Concerns have been raised over how regulators could have approved him given he had no significant banking experience.
Wheatley told MPs that systems had changed so that someone with a “demonstrable lack of banking experience” would not be able to hold such a role.