UK steps up scrutiny of traders' activity on benchmark rates
(Reuters) - Britain’s financial industry watchdog plans to step up its scrutiny of banks’ control over their traders to see if lessons have been learned from the scandal over benchmark rate rigging.
The Financial Conduct Authority (FCA) said its review of the risk that traders manipulate key benchmarks is a central part of its 2014/15 business plan, published on Monday.
Regulators around the world are looking closely at traders’ behaviour on a number of key benchmarks, spanning interest rates, foreign exchange and commodities markets.
Switzerland’s competition authority on Monday said it was investigating several banks, including UBS, Credit Suisse, JP Morgan, Citigroup and Barclays over their forex trading.
Eight financial firms have been fined billions of dollars by U.S. and European regulators in the past two years for manipulating benchmark interest rates and several more are being investigated.
Britain’s FCA said its review will assess whether banks have learned lessons from the rate rigging scandal and ask if adequate controls on traders behaviour and activity are now in place to prevent future manipulation of benchmarks.
The watchdog said its budget will need to increase by 3.3 percent to 446.4 million pounds ($742.7 million) for the year to March 2015 from the financial year just ended. It is fully funded from fees and fines imposed on the firms it regulates.
“The increases will be borne mainly by larger and more complex groups which pose the most risk and are costliest to regulate,” FCA Chief Executive Martin Wheatley said.
The watchdog is under fire for how it handled an investigation into whether people locked into UK pension plans are treated fairly. The FCA appeared to breach the way market sensitive news is released in an “extraordinary blunder”, Andrew Tyrie, chairman of the UK parliament’s Treasury Committee, said.
The FCA said it will also look at whether investment banks are handling potential conflicts of interest adequately and ensuring so-called “Chinese walls” are strong enough - to prevent confidential information received in one part of the business not being abused by a different part of the business.
The FCA will also examine the behaviour of asset managers, focusing both on how firms ensure that trading activity is consistent with expectations of market conduct and how asset managers are acting as good agents and taking proper account of investor interests.
It also plans to follow up on new rules for payday lenders, who provide short-term credit, and visit the top five firms to check they are following the consumer credit rules.
($1 = 0.6011 British Pounds)