Labour is calling for a public debate on whether the FCA needs to issue bigger fines and raised concerns over the accountability of the new regulator.
Speaking at a fringe event at the Labour conference today, shadow Treasury financial secretary Chris Leslie said fines are often seen as “insignificant” to the financial institutions involved.
JP Morgan was fined £137.6m by the FCA and an extra £434.5m by US regulators for the “London Whale” trading losses at the bank.
Responding to a question from Money Marketing about the difference in fine levels between the UK and the US, Leslie said parliament needs to debate the issue.
He said: “We need to have a proper strategic discussion about the level of fines because it seems to be very ad hoc. There doesn’t seem to be a massive amount of legislative guidance on what those are. If it is sentencing in the courts then we know politicians spend a lot of time angsting about whether sentences are correct and at what level but we don’t seem to have that discussion for financial services.
“What is the sliding scale? Is the FCA drawing these figures from the air? People want to know you have a rational basis for it because if you are talking about changing behaviour then for JP Morgan or others these fines are half a day’s profits. They sound big to the man on the street but they are insignificant in many ways.”
Leslie said he is anxious about the chain of accountability for the new financial regulators, the FCA and PRA, and wants to make them more accountable to parliament.
He said: “Should there be a set of safety valves between parliament and the regulator to discuss issues such as the size of fines and other issues that aren’t necessarily legislative? It would be about keeping the regulators on their toes, I know we have a select committee but it doesn’t quite do it for me.”
FCA director of policy, risk and research Chris Woolard said the regulator works within a defined legislative framework.
He said: “We do work within a legislative framework although we have a degree of ability to set the rules within it.There is a little bit of a danger of playing ‘my dad is bigger than your dad’, particularly with the US. We have to get to a stage where we are providing proportional penalties for what we see in terms of whether they are reasonable and if they fit the nature of the offence.”