Trends in Regulatory Enforcement in UK Financial Markets 2014/15 Mid-Year Report

Mon Oct 20 17:50:00 EDT 2014
By Robert Patton

Over the two and a half years from the start of the 2012/13 financial year through to 30 September 2014, the Financial Conduct Authority (FCA) and its predecessor imposed more than £1 billion in fines, according to NERA's new report, Trends in Regulatory Enforcement in UK Financial Markets 2014/15 Mid-Year Report. Authored by NERA Associate Director Robert Patton, the report analyses trends based on NERA's database of fines and other enforcement activity by the FCA and, previously, the Financial Services Authority.

Among the report's findings are that more than £400 million in fines was handed down in each of the 2012/13 and 2013/14 financial years; moreover, fines are on pace to reach a record level in 2014/15, with a total of £221 million imposed as of 30 September 2014, the halfway point in the financial year. In contrast with the recent levels, in no year prior to 2012/13 did total fines exceed £100 million.

The recent leap to a new plateau in fine amounts has been driven to a large extent by a handful of very large fines imposed on banks and brokerages, including several fines in connection with alleged manipulation of LIBOR and other benchmark lending rates. Indeed, nine of the 10 largest ever fines have been imposed since the beginning of the 2012/13 financial year, and five of these have been LIBOR fines.

By contrast, fines against individuals have fallen substantially, both in number and aggregate amount, a trend seemingly at odds with the FCA’s emphasis on enforcement against individuals as an integral part of its “credible deterrence” strategy. Since reaching a peak in 2011/12 of nearly £20 million, total fines against individuals have declined to about £4 million in 2013/2014 and less than £2 million in the first-half of 2014/15.