The Financial Conduct Authority imposed just 12 fines totalling £6.3m in the six months to September 30, the lowest level since the second half of the 2007-08 financial year, according to fresh statistics. This continued a steep decline in penalty levels that was in evidence at the end of the last financial year.
Multimillion-pound fines issued after the Libor and foreign exchange rigging scandals skewed the previous year’s totals, statistics gathered by the NERA economic consultancy show, a drop-off in activity even when those blockbuster penalties are stripped out.
The statistics follow a year that began badly for the FCA, which was left with a leadership crisis sparked by the 2015 sacking of Martin Wheatley, chief executive, by George Osborne, then chancellor. Mr Wheatley had presided over an era of record fines and was known as a scourge of errant bankers.
Mr Osborne eventually parachuted in Andrew Bailey from the Bank of England’s Prudential Regulation Authority, which sharpened criticism of influence from the Treasury and BoE on the FCA’s affairs. Mr Bailey started at the FCA just days after the UK’s Brexit referendum in June.
There have been questions about how the FCA will recalibrate its enforcement priorities under Mr Bailey and with the resource-sapping benchmark-rigging probes largely drawn to a close.
The FCA said the drop-off in penalties “should be viewed as a positive” as it “reflects the degree of misconduct in our market”.
It added: “There has been no change in the FCA’s approach to misconduct or financial penalties . . . The quoted figures reflect a snapshot in time of cases that are completed and do not take into account cases that are in train and incomplete.”
The nadir in fines may have been reached: two separate fines on Aviva and Sonali Bank in October for a total of £11m — for client-money failings and sloppy anti-money laundering controls respectively — far exceed the previous half-year’s total.
“The first half of 2016-2017 may simply reflect a transient lull in fines as the FCA redirects resources and attention from several large-scale investigations that have recently concluded,” NERA’s report reads.
Moreover, the research reveals that the regulator is becoming more creative in its use of penalties. Rather than a fine, the FCA is making imposing measures such as temporary bans on product or business lines. It used such variations or bans in 29 cases in the first half of the year, which puts it on track to surpass previous years’ totals.
In the criminal arena, the pipeline is also building. In the first three months of the 2016-17 financial year, the FCA opened 14 criminal investigations into insider dealing, taking the total number of cases open to 54.
This comes after a strong year against City insider traders. In late December a former star trader at BlackRock was sentenced to a year in jail after pleading guilty to insider trading. A former Schroders trader also pleaded guilty in a separate case earlier this year.
In May, a £14m case known as Operation Tabernula resulted in the conviction of two men — including a former managing director at Deutsche Bank — and the acquittal of three others.