The Financial Services Authority's new chief policewoman has warned the City that there will be no let-up in the tough line taken in response to a string of scandals.
The regulator has already smashed its 2010 record of £89.1m in fines, with the running total standing at £94.2m for the first seven months of this year.
Speaking following her promotion from acting to permanent head of enforcement, Tracey McDermott said: "Effective enforcement has, and will continue to be, a key part of FSA's strategy, to improve behaviour in our markets. We will continue to take tough, targeted action against those who don't play by the rules."
The £94.2m in fines raised this year includes the record £59.5m penalty imposed upon Barclays as a result of its traders' attempts to fix Libor interest rates.
With as many as 20 banks under investigation and Royal Bank of Scotland admitting that it faces a hefty penalty, there is now a realistic possibility that the total will end up at double the amount raised in 2010. Last year's tally came in at £66.1m, with £35m raised in 2009 and £22.7m in 2008.
The issue of what happens to the fines has, however, proved increasingly controversial. The cash raised by the watchdog currently goes into its coffers, and leads to lower fees for regulated firms which behave well. Fines against banks therefore lead to lower fees for other banks. With RBS currently majority-owned by the taxpayer, a heavy fine against the bank would effectively mean that the taxpayer was subsidising the City, because other banks would have their fees reduced.
But The Independent has learnt that the Government will outline plans to stop banks from benefiting from the fines next month. In the wake of the Barclays fine the Chancellor, George Osborne, said that ministers would look into channelling fines into the Government's coffers, rather than the regulator's.
Those proposals could now be attached to the forthcoming banking Bill. The Chancellor has also indicated that reforms to fines could be made retrospective so that the Barclays penalty, and any others paid before new law is passed, will be covered.
UBS has also been co-operating with the regulatory investigation into attempts to fix Libor, and both HSBC and Lloyds have said that they are working with regulators on the issue.
The FSA is to be replaced by the Financial Conduct Authority, which will be run by Martin Wheatley, the former chief regulator in Hong Kong. It was his decision to promote Ms McDermott, who has been doing the job for 16 months in an acting capacity. In addition to the record Barclays fine, Ms McDermott has gained plaudits for a string of insider trading convictions. She took on the role after Margaret Cole, a candidate for Mr Wheatley's role, left the regulator. Banks have already been told that they must hold more capital and that they will have to ringfence retail operations following recommendations by Sir John Vickers' Independent Commission on Banking. The Bank of England is to take responsibility for banks' broader financial health.
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