THREE questions press on an exasperated public in the wake of massive new fines totalling £1.1 billion on five banks, this time for attempted manipulation of foreign exchange rates.
Have regulatory sanctions and penalties become an everyday feature of banking? Will those incomprehensible bonuses continue to be paid? And when – if ever – will anyone go to jail?
HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase and Citibank have all been fined in the latest round. A separate probe is continuing into Barclays. Adding in the penalties imposed by US regulators, the full total is £2bn. Yet these fines never seem big enough – or come frequently enough – to halt an inbred gaming of the financial system by institutions.
RBS was fined £217 million. UBS was handed the biggest fine, £233m. Regulators said they found a “free-for-all culture” rife on their trading floors which allowed the markets to be rigged for five years, from January 2008 to October 2013.
Each of the fines imposed were records for the Financial Conduct Authority (FCA).
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RBS said it had placed six individuals into a disciplinary process and suspended three pending its own further investigation. Chief executive Ross McEwan said the bank had fallen “well short” of the standards he expected.
“Play it again, Sam” will be the reaction of many on reading all this. For it does seem as if these breaches have become systemic. Even before this latest clobbering, US and European banks are reckoned to have incurred fines and litigation costs of £131bn since 2009. Yet the lenders don’t appear to be even close to the end of this process – nor the regulators.
In the case of RBS, the total fines for forex market offences here and in the US are $634m (£400m). Earlier this year, the bank set aside £3.1bn to cover fines and damages relating to mis-selling of US mortgage bonds (£1.9bn), payment protection insurance mis-selling (£650m) and compensation for small businesses wrongfully sold hedging products (£500m).
As for bonuses, RBS paid out £588m last year despite suffering an £8.24bn loss. The payouts were down 18 per cent on 2012 but are unlikely to disappear due to contractual arrangements and the need to retain staff.
On criminal proceedings, FCA boss Martin Wheatley said: “This isn’t the end of the story. The individuals themselves will face the consequences”.
The Serious Fraud Office is preparing potential criminal charges against those alleged to have masterminded the scheme.
That is likely to be a long and complex process. Is it limited to those directly involved in the fixing rings? What of those higher up? What of the directors and the auditors? They might argue that if falling down on the job is a criminal offence, few managers would be safe. But it seems only the spectre of criminal liability will work to change a banking culture rotten to the core.
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