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97% drop in FCA fines not a return to light touch regulation

The more than 97% decrease in fines levied by the UK regulator against financial institutions does not signal a return to light touch regulation, says Mark Steward, director of enforcement and market oversight at the Financial Conduct Authority (FCA).

97% drop in FCA fines not a return to light touch regulation

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Speaking at the Practising Law Institute on Thursday, Steward said that the FCA and its predecessor the Financial Services Authority levied more than £3bn ($3.7bn, €3.5bn) in financial penalties in the last five years.

However, he conceded that “most were imposed before 1 April 2016”.

97% decline

The FCA netted £22.2m in fines against 23 financial institutions in 2016, a drop of more than 97% compared with 2015 when it fined 40 banks and City firms to the tune of £905m.  

The largest fine in 2016 was £8.2m levied against Aviva. This compares with a £284m fine against Barclays.

Halcyon years  

“As several news stories recently pointed out, since [1 April 2016], the aggregate level of fines appears to have reduced markedly or, at least compared to the halcyon years prior to that date. What does this mean? Has light touch returned?” Steward asked. 

“The remarkable thing about these fines – and the experience in the US is very similar – is that they have been imposed by agreement as part of what is here called ‘early settlement’.”

Steward said that the fines were paid after negation for “closure of the underlying investigations”, with most firms accepting the “full weight of responsibility and culpability”.   

Going soft?

“But let me answer the questions I have posed. Has light touch returned? Have we gone soft? For many of you today, the answer may be disappointing because it is a very clear ‘no’. We have not gone soft nor do we intend nor will we.

“Light touch has not returned.”

Steward doesn’t believe that the size of a fine says anything significant about the FCA’s enforcement actions, provided “it fits the crime”.

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