Financial Conduct Authority City regulator fines balloon to £320m in six months
Financial services watchdog starts to mete out stiff penalties after years of much-criticised inactivity
The City regulator imposed more fines on companies in the first half of 2019 than in the previous three full years as it faced mounting pressure over failing to protect customers of the financial services industry.
In the six months to the end of June, the Financial Conduct Authority (FCA) imposed 10 fines worth a total of £319.2m – more than five times the annual total for 2018 of £60.5m. Fines in the first half of 2019 outstripped the combined total for the previous three years of £311m.
The biggest fine in 2019 so far was the £102m imposed on Standard Chartered in April for anti-money laundering failings that breached sanctions against Iran.
Other big penalties included £45.5m for Bank of Scotland’s failure to disclose information about a £245m fraud at its Reading branch and £29m for Carphone Warehouse’s mis-selling of insurance linked to its Geek Squad service.
The regulator also fined the investment banks Goldman Sachs and UBS £34.4m and £27.6m, respectively, for misreporting millions of transactions over a decade.
On Wednesday, the FCA holds its annual meeting where its bosses will face questions about scandals and troubled businesses that campaigners say the regulator should have tackled at an earlier stage.
The meeting has extra significance because the FCA’s chief executive, Andrew Bailey, is one of the leading candidates to become the next governor of the Bank of England. Bailey took over at the FCA in 2016 and was seen as being more City-friendly than his predecessor, Martin Wheatley, who was forced out by former chancellor George Osborne.
In May, more than a dozen MPs said Bailey should resign over the failure of London Capital & Finance, an investment firm at the centre of a £236m scandal that cost thousands of individual investors dearly. The FCA’s enforcement team was warned three years ago about the company but failed to act.
The Treasury select committee has also questioned whether the FCA was “asleep at the wheel” as problems stacked up at the Woodford Equity Income fund. The fund, run by high-profile asset manager Neil Woodford, blocked withdrawals last month after being overwhelmed with demands from investors wanting to withdraw their cash after poor market bets.
The FCA also faces continuing questions over its handling of how RBS and Bank of Scotland, now part of Lloyds Banking Group, treated business customers. Campaigners for customers of both banks claim the regulator failed to stand up for small businesses that the banks preyed upon.
Neil Mitchell, who campaigns for compensation for former business customers of RBS’s disgraced GRG unit, said: “The FCA is finally tackling some of the financial crime in the City – with the emphasis on finally. So what?”
Mitchell said he and other campaigners would attend the meeting. “There will be some uncomfortable questions for the chairman and the chief executive, especially after the year they’ve had.”
However, Nick Price, a commercial and regulatory disputes specialist at the law firm Osborne Clarke, said beneath the headline numbers the FCA’s fines were “business as usual”. The FCA’s fines peaked at almost £1.5bn under Wheatley in 2014.
“Fines are up this year but a few years ago they were much higher,” Price said.
He said the FCA’s ability to police the financial industry could be hampered by the extra work it would have to do after Brexit, especially if there is no deal.
“Any trends are likely to be vulnerable to the impact of Brexit,” Price said. “Whether the FCA will have the resources to deal with the post-Brexit unknowns and maintain its current regulatory priorities remains to be seen.”
The FCA declined to comment.
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