News Column

Libor may not be the end of market rates abuse, says FCA

February 5, 2014

Sean Farrell

The Financial Conduct Authority is examining possible abuse of further London -based market rates on top of its investigations into Libor and foreign exchange pricing, the regulator's chief executive told MPs yesterday. Appearing before the Treasury select committee, Martin Wheatley said: "There are a number of other benchmarks that operate in London that we are investigating because of concerns raised with us." Wheatley declined to say which benchmarks the FCA had added to its list of investigations until it had decided whether there was a case to answer. His comments came as Lloyds Banking Group suspended one of its foreign exchange traders after an internal investigation into currency manipulation allegations, according to reports yesterday. The suspension of Martin Chantree marked the first time the bailed-out bank has been linked with alleged currency manipulation, although a Reuters source said the banker had not been accused of any wrongdoing. The FCA has fined banks for rigging Libor , the London interbank offered rate, which is used to price more than $300tn (pounds 184tn) of financial products across the world from household mortgages to business loans. A partner at the law firm Norton Rose Fulbright , Jonathan Herbst , said of Wheatley's comments: "This is a very hot topic for the FCA. Was the behaviour that took place in relation to Libor unique or was it symptomatic of something deeper going on across the benchmarks? That's the big question." The FCA is also working with regulators in Europe , Asia and the US to investigate claims of rigging of foreign exchange benchmarks by banks. Wheatley said: "The allegations are every bit as bad as they have been with Libor . Given what has come out, no, people won't trust the way rates are fixed." He said the foreign exchange inquiry would take until next year to complete: "The nature of these investigations is that these things are very hard to predict." The FCA launched its inquiry in October after claims suggesting traders at banks pooled information about their positions with those at other firms to manipulate a rate used by fund managers to buy foreign currencies in the $5tn-a-day market. Barclays , Royal Bank of Scotland and UBS are among banks in talks with the FCA about possible wrongdoing, though no formal accusations have been made. MPs questioned Wheatley and his chairman, John Griffith-Jones , about a wide range of misconduct by banks but particularly their continued abuse of customers. Wheatley agreed with the Labour MP John Mann that Britain had seen "the biggest series of quantifiable wrongdoing in the history of our financial services industry" and said he could not think of another industry that had an equivalent record. The FCA fined Lloyds Banking Group pounds 28m in December for putting staff under pressure to sell products customers did not want, or face demotion and pay cuts. Wheatley said the FCA was examining Lloyds' proposed bonuses for 2013 and said there would be deductions from senior managers who had encouraged staff to sell pounds 2bn of inappropriate products. He said: "The whole concept of clawback [of bonuses] is that those involved in the decision should suffer the consequences of our subsequent enforcement action." The FCA would consider tougher guidelines on financial sector pay this year but was unlikely to extend Brussels' cap on bankers' bonuses to asset managers or insurers. The FCA bosses also revealed they had received complaints about RBS's Global Restructuring Group before Lawrence Tomlinson's report accused the division of driving small firms out of business for its own gain. The FCA was in discussions with other banks to check on the operations of their units that dealt with troubled businesses. $5tn The amount traded daily by fund managers in the foreign exchange market. The FCA is investigating claims of rate manipulation

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Source: Guardian (UK)

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