Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
54
Regulatory Authority, a securities regulator, imposed approximately twenty times as
many fines as the FSA. Similarly, financial institutions face significantly higher
regulatory fines and settlements in the US than in the UK. For example, for its role
in the LIBOR scandal, Barclays was fined $200 million by the Commodity Futures
Trading Commission (CFTC) and $160 million by the US Department of Justice
(against £59.5 million by the FSA). RBS’s equivalent fines in February 2013 were
$325 million by the CFTC, and $150 million by the US Department of Justice (DoJ).
6.6 The quantum of fines also seems to be increasing in the US. In the second half of
2012, Standard Chartered incurred a civil penalty charge of $340 million and a
forfeiture of $100 million to the New York Department of Financial Services for
transactions with Iranian clients. HSBC was fined $1.9 billion by the DoJ, the Office
of the Comptroller of the Currency (OCC) and the Federal Reserve after allegations
of money laundering through the US by Mexican drug cartels and certain other
transactions with sanctioned countries.
6.7 UBS has been fined a total of $1.2 billion by the DoJ and the CFTC for its part in
the LIBOR events, as well as being ordered to pay a disgorgement of profits of
CHF59 million to the Swiss Financial Market Supervisory Authority (FINMA). 88
6.8 The UK and US regulatory environments have become much more challenging for
all banks. And in addition to the cost of fines, banks face substantially increased
compliance costs of their own in their efforts to ensure their operations do not
breach the various regulatory rules. The most obvious cost relates to the need for
banks to employ more compliance staff. 89 The costs for regulators have also
increased (see Figure 6.3 on the FSA budget).
Figure 6.3 – FSA (and predecessors) Budget Evolution (1998-2013)
£m
600
Actual
Estimate
400
+11%
200
156
163
170
182
195
+6%
203
211
241
267
269
298
335
392
451
475
544
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
% CAGR (in %)
Notes: Care is needed with these figures due to increases in the scope of the FSA’s activities during the period; 2013 represents the budgeted costs
Source: Financial Services Practitioner Panel, FSA annual reports and business plans
88 FINMA, “LIBOR: FINMA concludes proceedings against UBS and orders disgorgement of profits”,
press release, 19 December 2012.
89 See Section 3 for Barclays’ compliance staff numbers.