The FCA has hit out at banks for failing to address risk management issues in the wake of the Libor rigging scandal.
A thematic review carried out by the regulator found that while “some progress” has been made in improving oversight and controls around benchmarks, the application of lessons learned from the episode has been “uneven” across the industry and “lacked the urgency required”.
In particular, the FCA says firms are interpreting the IOSCO definition of benchmarks too narrowly and, as a result, are failing to identify a wide enough scope of benchmark activities. In addition, some businesses have “not made sufficient effort” to address conflicts of interest.
The FCA has written to all firms involved in the review to provide individual feedback.
FCA director of supervision – investment, wholesale and specialists Tracey McDermott says: “We have seen widespread historic misconduct in relation to benchmarks.
“It is now critical that firms act to restore trust and confidence in the system. Firms should have in place systems to manage the risks posed by benchmark activities and to address the weaknesses that have previously been identified.
“We recognise that this is a significant task and firms had made some improvements, but the consistency of implementation and speed at which these changes have been taking place is disappointing. Firms should take our findings on board and consider further steps to improve their oversight.”
The FCA has issued a slew of fines in relation to benchmark rigging in recent years. The largest of these, £284m, was handed to Barclays for foreign exchange manipulation in May this year.
UBS, Deutsche Bank, Citibank, JPMorgan, RBS, UBS, HSBC, Rabobank and Lloyds Bank of Scotland have each been hit with penalties running into the hundreds of millions by the regulator in relation to benchmark rigging.