Prudential Regulation Authority chief executive Andrew Bailey says large conduct fines are putting financial firms at risk of bankruptcy.
Speaking to the Treasury select committee today, Bailey pointed to the US, where fines are highest for regulated firms, as posing the greatest risk to financial stability.
Bailey said large fines could create prudential problems and all regulators must be involved in assessing the impact on stability.
TSC member and Conservative MP Steve Baker raised the example of the Co-op Bank where some have accused the regulatory restrictions imposed as threatening the future of the bank.
Bailey says: “There is a point when the scale of the fine or nature of business restrictions imposed as part of a fine which could have prudential implications. It’s hard to predict those points because they are dependent on the state of the world at the point it happens as well as the reaction of counter parties including customers creditors and counter parties.
“In a world where that happens there must be strong coordination between authorities involved including prudential. We have to judge and advise on how it can be handled without disturbing financial stability.
“I regularly get told that it is not the intention to make firms fail – and that has not happened to date. I can’t tell you where the cliff is because it depends.
“It depends on having a strong dialogue and taking measures where there could be problems. I would like to see stronger coordination.”