Watchdogs have given six city banks two months to accept a billion pound plus settlement of the long running foreign exchange trading scandal.
The proposal, from the Financial Conduct Authority (FCA), could see fines well in excess of £100m – and probably more than the British record £160m – handed to each of Barclays, Royal Bank of Scotland, HSBC, JP Morgan, City and UBS if they agree to the deal on the table.
But the settlement offer does not so far include overseas watchdogs, including the all important American regulators. The US end of what has become a multi-national inquiry involves several watchdogs, all of which could impose penalties many times the size of the record fine imposed by a UK watchdog. That was imposed upon UBS, but the £160m levy was only part of the $1.5bn global settlement over Libor rigging.
Watchdogs are understood to be keen to draw a line under the foreign exchange trading scandal, which is causing real fear in the City because of the instability it is creating.
High profile fund managers such as Neil Woodford have been steering clear of banks because of the impact of fines. The industry’s legal and regulatory issues are also complicating the Government’s efforts to sell down the state’s interest in the sector, particularly in the case of Royal Bank of Scotland. Experts describe the proposal as “an initiative of the FCA” amid pressure from Government to bring the inquiry to a close.
Regulators are keen on the move because it would kill off the sort of instability created if they select one of the six to “go first”. The £290m US and UK penalty imposed on Barclays to settle its role in the Libor ultimately turned out to be one of the smallest imposed as a result of the affair.
But it sparked a political and media storm that took the City and its watchdogs aback, and led to Barclays losing both its chairman Marcus Agius and its chief executive, Bob Diamond.
Regulators want to avoid a similar situation this time round, as they seek to continue stabilising the financial system with the aim of securing Britiain’s economic recovery and getting more financing into the hands of business.
However, the plan’s success remains open to question as it is believed some of the banks may choose to shun the settlement offer and seek to fight.
This is becoming more common: Barclays, for example, is battling the FCA’s attempt to fine it over its middle eastern fund raising, while at the same time fighting US attempts to impose a heavy penalty over the operation of its dark pool share trading exchange on Wall Street. The FCA declined to comment.