FCA fines tally falls to 15-year low

The number of fines imposed by the Financial Conduct Authority in 2017 has fallen to the lowest since 2002 when modern regulation of the City was in its infancy.

With a few working days remaining in 2017 the City regulator has imposed 13 fines totalling £229.5m on companies and individuals. Last year the FCA imposed 23 fines valued at £22.2m.

The number of penalties in 2017 is the lowest since the Financial Services Authority imposed nine fines worth a total of £7.4m in 2002 – its second year of operation. The FCA replaced the FSA in 2013 when supervision of the banking system was transferred to the Bank of England.

The number of regulatory fines rose steadily from 2002 and peaked at 80 in 2010 as the regulator clamped down on the City after the financial crisis. The number of fines did not fall below 40 between 2008 and 2015.

The number and value of fines have fallen under the leadership of Andrew Bailey, who became the FCA's chief executive in July 2016. He replaced Martin Wheatley, who was sacked by the then chancellor George Osborne after the City objected to his confrontational style.

Bailey has said the FCA has not softened its approach and that it would be odd if the level of penalties remained at post-crisis levels.

Peter Snowdon, a consultant solicitor at the law firm Norton Rose Fulbright, said a fall in the number of fines did not necessarily mean a drop-off in enforcement by the FCA. He also said rules introduced in 2016 holding senior managers of banks and insurers responsible for the conduct of their firms could be delaying settlements.

He said: "Individual cases can take many months to reach a conclusion and a fine in one year may reflect significant activity in a previous year. Under the senior managers regime if a firm settles it can hang out the individual concerned and the process is probably more complicated because the FCA is effectively having to run two cases."

The FCA pointed to comments by Mark Steward, director of enforcement, about its approach to investigations. In September Steward said the FCA had opened 75% more investigations in the past year reflecting stronger market abuse regulations, more active policing of capital markets and criticism of the FSA's failure to investigate the collapse of HBOS.

The amount collected in 2017 is 10 times the figure for 2016 but more than two thirds of the total is covered by a £163m penalty on Deutsche Bank for lax money laundering controls in Russia. The fine, announced in January, was the biggest imposed on a bank in the UK for failure to monitor money laundering.

There is no sign this year’s bigger haul will benefit charities and other causes the government has passed FCA fines to in the past. The chancellor, Philip Hammond, did not mention FCA fines in his Budget speech, suggesting the fines will go into Treasury coffers. The Treasury did not respond to enquiries about how the fines would be spent.

Total fines have fallen from a peak of £1.5bn in 2014 when the FCA dished out 40 penalties and fined five banks a total of £1.1bn for rigging foreign exchange markets. As recently as 2015 the annual total was £905m.

The FCA fined five companies in 2017 with the remaining eight fines going to individuals for offences such as market abuse and unfair treatment of customers. Some firms were censured but escaped fines, such as Capita last month, which was strong-armed into paying up to £66m to investors who suffered losses due an investment scheme it had operated.

Snowdon said there could be a jump in fines against individuals after bosses of consumer credit companies become responsible for their firms' actions under an extension of the senior managers regime due to be finalised in 2018.

The FCA has stepped up consumer protection efforts by enlisting Arnold Schwarzenegger to encourage claims for PPI mis-selling, forcing hire-purchase retailer BrightHouse to repay £14.8m to vulnerable consumers and proposing measures to help indebted credit card customers.