Mobile phones were used to dodge regulation in rigging scam resulting in £2.6bn fines.
On 12th November, six big banks were fined by the UK’s Financial Conduct Authority (FCA) and two US regulators. They include HSBC, Royal Bank of Scotland, UBS, JP Morgan Chase, Citibank and Bank of America.
According to the chief executive of the Financial Conduct Authority (FCA), they identified widespread poor practice. This included the use of mobile phones on trading floors and the unmonitored use of private chat rooms to disclose confidential customer information and trading positions. All had been done with the aim of benefitting the interests of the collective groups.
Despite vowing to reform, the financial services industry has been blighted by financial scandals and systemic failures over the past few years, all of which came to a head in the form of a collective £2.6 punishment. In the first instance, it was thought that misconduct was down to the individuals involved, however, it now seems that the problem runs deeper than that and that misconduct is in fact a cultural issue.
In reaction to the announcement, Governor of the Bank of England Mark Carney has warned that bankers should be hit harder for misconduct. In what could be viewed as a radical change in the financial services payment system, he argues that the current fines in place are not drastic enough to discourage bankers from unlawful behavior. In order to recoup consumer trust, Carney says that there needs to be a fundamental cultural shift within the sector.
There are a number of things to consider when looking at how best to move forward. One of the options may be to pay bankers partly in ‘performance bonds’, which could then be used to pay fines. This is an idea mooted by President of the Federal Reserve Bank of New York, Bill Dudley, and would aim to hit bankers’ rather than investors’ pockets. Limiting the bonus cap is another option and one that Carney is said to have his sights on, however there is the chance that bankers would simply increase fixed pay if this was introduced.
These huge fines yet again demonstrate to the wider financial services sector just how vital it is to protect their businesses from employee misconduct and significant financial damage. By having a compliant solution in place, misconduct can be identified and dealt with before it becomes damaging and if the issue is cultural, it is even more vital for decision makers to have a solution in place that cannot be easily bypassed by employees. Only then can they be safe in the knowledge that the FCA will not be knocking at their door.
For further details on the fines, watch the FCA press briefing here.