City hit by record fines as watchdog vows to keep up pressure

Penalties hit £136m in first quarter as City fears era of 'fine inflation'

Financial firms, City workers and other miscreants were hit with £136m in fines during the first three months of 2013, the most in the first quarter of a year since the Financial Services Authority was created 15 years ago.

And the chief executive of the watchdog's successor, the Financial Conduct Authority, told The Independent that there will be no let-up as the new regulator launches with the aim of cleaning up London's financial centre.

The tally for the last three months of the FSA's existence is in fact more than the total amount in fines levied in any one year since the regulator was created 15 years ago with the exception of last year, when the total came to £312m. That was chiefly down to the Libor interest rate fixing scandal, which saw the Swiss bank UBS paying £160m over its traders' activities. It paid a further £29m for failing to prevent unauthorised – or rogue – trading. Barclays paid £59.5m over its role in the Libor affair.

The rapid escalation in the size of fines is illustrated by the total for 2002 – the first year for which the FSA kept yearly data – when the total stood at just £7.4m. As recently as 2007 the yearly tally stood at just £5.34m.

In fact, between 2002 and 2009 the watchdog levied fines totalling £136.5m – just £500,000 more than in the last three months.

But the City is unlikely to enjoy such "light touch" treatment in future. Martin Wheatley, chief executive of the Financial Conduct Authority, said: "The FCA will continue take tough and meaningful action against firms and individuals who break our rules. We will continue to use the full range of our powers to ensure that we get better results for consumers and ensure that markets function well."

The figure for the first quarter of this year was boosted by the £87.5m penalty paid by Royal Bank of Scotland over the role played by its traders in the Libor affair. A further £16m was paid by Prudential, the insurer, over its failure to deal with the watchdog in "an open and co-operative manner" over the botched attempt to merge with the Asian insurer AIA, with some £14m charged against it for listing rules breaches.

The work of the FSA has now been split, with the FCA dealing with conduct issues while the Prudential Regulation Authority takes over the oversight of the soundness of financial companies under the auspices of the Bank of England.

There is still a prospect that penalties levied by the new regulators, when combined with the £136m during the last three months of the FSA's existence, will beat last year's record FSA total because a number of banks are still in the cross-hairs of regulators on both sides of the Atlantic over attempted Libor fixing.

However, the increasing fine inflation has drawn criticism from lawyers operating in the regulatory arena. Simon Morris, partner at CMS Cameron McKenna, said: "It is FSA policy to ensure that misconduct gets maximum attention, both to punish the firm and to warn the market about what's required. The FSA wants the publicity and the transgressor pays for this through the fine.

"The FSA does this by imposing a spiral of ever-increasing fines and the FCA and PRA are sure to follow suit. The result, though, is that firms now live in environment of fine-inflation, where each record for 'highest ever' will last for a few months at most."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Mortgage Advisor - OTE £95,000

£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Day In a Page

Isis in Syria: Influential tribal leaders hold secret talks with Western powers and Gulf states over possibility of mobilising against militants

Tribal gathering

Influential clans in Syria have held secret talks with Western powers and Gulf states over the possibility of mobilising against Isis. But they are determined not to be pitted against each other
Gaza, a year on from Operation Protective Edge: A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians

Gaza, a year on from Operation Protective Edge

A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians
Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously

Illnesses, car crashes and suicides

Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously
Srebrenica 20 years after the genocide: Why the survivors need closure

Bosnia's genocide, 20 years on

No-one is admitting where the bodies are buried - literally and metaphorically
How Comic-Con can make or break a movie: From Batman vs Superman to Star Wars: Episode VII

Power of the geek Gods

Each year at Comic-Con in San Diego, Hollywood bosses nervously present blockbusters to the hallowed crowd. It can make or break a movie
What do strawberries and cream have to do with tennis?

Perfect match

What do strawberries and cream have to do with tennis?
10 best trays

Get carried away with 10 best trays

Serve with ceremony on a tray chic carrier
Wimbledon 2015: Team Murray firing on all cylinders for SW19 title assault

Team Murray firing on all cylinders for title assault

Coaches Amélie Mauresmo and Jonas Bjorkman aiming to make Scot Wimbledon champion again
Wimbledon 2015: Nick Bollettieri - Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!

Nick Bollettieri's Wimbledon Files

Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!
Ashes 2015: Angus Fraser's top 10 moments from previous series'

Angus Fraser's top 10 Ashes moments

He played in five series against Australia and covered more as a newspaper correspondent. From Waugh to Warne and Hick to Headley, here are his highlights
Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high