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
News
The two faces revealed by the ultraviolet light
newsScholars left shaken after shining ultraviolet light on 500-year-old Welsh manuscript
News
Rosamund Pike played Bond girld Miranda Frost, who died in Die Another Day (PA)
news
Arts and Entertainment
books
News
newsHow do you get your party leader to embrace a message and then stick to it? With people like this
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat