FCA says not all lessons from Libor scandal learnt

Banks and other firms must do more to remedy the way they manage benchmarks after a number of rate-rigging scandals rocked the financial industry, according to the United Kingdom regulator.

But it said that “some progress had been made on improving oversight and controls and benchmarks” following the scandals involving the benchmark rates in Libor – the interbank lending rate – as well as in foreign exchange and gold markets.

Numerous lenders punished for rigging Libor were later fined for trying to rig currency market benchmarks.

The thematic review of oversight and controls of 12 firms between August 2014 and June 2015 looked at all benchmarks apart from Libor and forex, which have already been heavily scrutinised after a series of scandals that resulted in huge fines for some of Britain’s biggest banks like RBS and HSBC.

The City watchdog also said that bankers “often lacked the urgency required, given the severity of recent failings”. “It is now critical that firms act to restore trust and confidence in the system”, said Tracey McDermott, FCA director of wholesale supervision.

Simon Morris, a financial services partner with the law firm CMS, said he found it “surprising” that the FCA had found a lax approach by some firms towards putting things right, given how “benchmark manipulation came close to shattering the City’s reputation for good”. “This report is a clear wake-up call, and if things haven’t speeded up by the autumn we can expect the next round of multimillion-pound fines to commence”.

“The identification of a complete population of benchmarks subject to the IOSCO definition is a significant challenge that firms have been grappling with”. It found that firms needed to continue strengthening governance and oversight of how they participate in compiling benchmarks. “Some firms were still not able to identify all the benchmarks they administered, submitted data to or published”, the FCA’s on-site visits found.