FCA promises ‘tough’ action on Libor rule-breakers

The Financial Conduct Authority (FCA) will also be looking for conflicts of interest in the investment banking arena and will visit the UK’s top five payday lenders to make sure vulnerable customers were protected.

The regulator outlined its plans for the coming year as it announced a 3.3 per cent rise in its annual budget to £446.4 million as it takes on wider responsibilities, including oversight of the market for short-term credit and the launch of a new watchdog for payment systems.

All this comes as FCA chief executive Martin Wheatley, below, faces pressure over the release of market-sensitive information about an investigation into the treatment of customers who bought about 30 million “zombie” funds from insurance companies between the 1970s and the turn of the millennium.

Details of the inquiry, disclosed in a newspaper interview, sent shares in insurance firms tumbling – after they had been hard hit by pensions reforms announced in the Budget.

Andrew Tyrie, chairman of the Treasury select committee, said the way in which the information was released was an “extraordinary blunder”, and called for a full explanation about how the apparent mistake could be made by the watchdog. The FCA’s board has called in an external law firm to conduct an investigation into its handling of the issue.

In the meantime, Wheatley said the regulator wanted to check whether firms had “learnt lessons from Libor and other recent controversies and ask if adequate controls on traders’ behaviour and activity are now in place to prevent future manipulation of benchmarks”.

Banks have already been fined billions of pounds over traders’ attempts to rig Libor, and the sector has since become immersed in a further set of allegations, this time over the fixing of foreign exchange rates. Wheatley said: “We are determined that firms need to take the matter of manipulation of any benchmark seriously and will be working with firms to seek out any issues that may remain.”

The FCA also highlighted changes in technology, the booming property market and complex retirement products as among the most significant risks facing the financial services industry. Christopher Woolard, the regulator’s director of policy, risk and research, said rising house prices could encourage firms to lend to “riskier” borrowers, who may be unable to manage higher repayments if interest rates rise from their current record low levels.

He added: “Consumers may get a poor deal from complex, opaque or overpriced retirement income products, with hidden charges  or fees that make it difficult to compare options across the market.”