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
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

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with excess, cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?