Banks can expect more pain, warns City's top enforcer Tracey McDermott

Tracey McDermott says further 'tough' action awaits, as fines hit record levels

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.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'