Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a732313

FX rigging as bad as Libor scandal says FCA

by David Campbell on Feb 05, 2014 at 07:44

FX rigging as bad as Libor scandal says FCA

Allegations about the banking industry's manipulation of foreign exchange rates have the potential to be 'every bit as bad' as Libor the head of the Financial Conduct Authority has told MPs.

Speaking to the Treasury Select Committee Martin Wheatley said that an investigation into concerns had now been extended to 10 banks. Several, such as RBS and Barclays, have also launched their own internal investigations.

‘The allegations are every bit as bad as they have been with Libor,’ he said. He added that a number of other rate benchmarks operating in London are now being investigated alongside Libor.

He added that the investigation was likely to stretch into 2015.

2 comments so far. Why not have your say?

Tony Clarkin

Feb 05, 2014 at 09:03

Duh!

London is the centre of FX trading and the volumes are staggering.

report this

PCIAM

Feb 05, 2014 at 11:45

Ah, a soapbox!

There is a basic self-contradiction here.

The clearing banks are too big to fail, so they are preserved by taxpayer money, rather than being allowed to go the wall and being split up/shrunk/cannibalised.They therefore remain too big to behave in a manner that produces the optimum outcome for the UK as a whole, so they are investigated and fined repeatedly.

This is unlikely to change, because their overheads force them to make a higher return on their activities than their smaller competitors, mainly because of legacy costs from their structure and their past foolishnesses. These higher returns get them into trouble, the FCA (eventually) realises this and investigates, and fines.

The regulatory industry benefits, but all the bank stakeholders lose out - the customers because the banks charge the sensible ones more, the staff because the banks sweat them more, and the shareholders because the banks aren't as profitable.

Issues arising?

1. Financial service companies all get tarred with the same brush, because those that are structurally/historically predisposed to put their interests before those of their customers are the ones that get the headlines. And headlines there are, because column inches are the regulatory industry's way of demonstrating success, though one could argue the fines indicate failure, because the sins were not prevented.

2. The public engage in moral hazard - the safety net discourages customers/clients from engaging on the age-old principles of 'caveat emptor' and trust, driving them instead towards the highest return whilst staying within the safety net - a perverted trade-off between risk and reward. But the insurance policy on the risk is being provided by a subsidiary of the regulator, who in turn isn't stopping the bad guys until after the event. And who pays for this? The good guys.

3. Because the regulator is obsessed (presumably on the basis that God loves a sinner) with reforming the bad guys, the good guys, who have managed perfectly well for years putting the interests of their customers before their own, now have to cope with the huge millstone of UK legislation and mega-forests of paperwork. Our European competitors don't - they only have MiFID, which is in comparison short and to the point. We of course have both!

Would it not be better for the UK to have a regulatory industry that is constructive, helpful, inexpensive and effective? I'd be all for that. As it is, the current regulatory burden (10% of our combined turnover?) is only likely to increase.

Any views, Mr Wheatley?

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Sponsored Video: Barings on investing in Frontier Markets


From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:

Archive

On the road

Click here to find out more from the Audience Development team.

Read more...

The Expert View: Lloyds, Schroders and Countrywide

by Michelle McGagh on Aug 01, 2014 at 05:01

Sorry, this link is not
quite ready yet