Banking abuse prompts reform promise from Chancellor
The Banking Reform Bill or Financial Services Bill could be amended to give regulators extra powers to deal with abuse of LIBOR and other price-setting mechanisms, Chancellor George Osborne told MPs this week.
Speaking in the House of Commons, Osborne said: “Fraud is a crime in ordinary business; why shouldn’t it be so in banking?”
Lord Turner, chairman of the Financial Services Authority (FSA), says the FSA does not have powers to pursue criminal sanctions.
Osborne said there were “gaping holes” in the law. Amendments would be brought forward to ensure fines paid by the financial services industry go to the Exchequer not the regulatory body. He has appointed Martin Wheatley, chief executive designate of the Financial Conduct Authority (one of the bodies that will replace the FSA) to review the adequacy of the UK’s civil and criminal sanctioning powers with respect to financial misconduct and market abuse.
The Serious Fraud Office is expected to decide by the end of this month whether it will bring criminal charges.
Barrister PJ Kirby, of Hardwicke, whose practice includes banking and professional negligence, says he is not surprised by the LIBOR manipulation scandal, and “often sees fairly dubious practices”.
“In a sense one wonders whether bankers have learnt anything from history in the last 160 years,” he says.
“Market manipulation has been common throughout the generations. We had the collapse of BCCI more than 20 years ago, the ‘stagging’ or multiple share applications over the sale of state assets in the 1980s, and the ‘Flaming Ferraris’ in the early 1990s, yet they keep coming round in circles.”
