UK banks ‘failing to clean up their act’

MORE than three years after the Libor interest rate-rigging scandal erupted at Barclays, London-based banks are still failing to clean up the mechanisms for setting prices in wholesale financial markets.

A review by the Financial Conduct Authority has found that the lessons learned from the manipulation of the Libor, foreign exchange and gold markets have been ‘uneven’ across the financial sector and there has been a lack of ‘urgency’ in dealing with them.

This despite the large fines paid by many banks.

Cheating in the wholesale financial markets has seriously damaged the reputation of the City of London which dominates trading in Europe and has a direct impact on the consumer by affecting the cost of mortgages and the exchange rate travellers receive when going abroad.

Tracey McDermott, director of supervision at the FCA, said: ‘We have seen widespread historic misconduct. It is now critical to restore confidence in the system. Firms should have in place systems to manage the risks… and address the weaknesses previously identified.’

The FCA accused firms of seeking to circumvent rules by defining benchmarks too narrowly and failing to identify conflicts of interest that can arise in these markets. In the past some dealers have sought to manipulate the prices set so as to improve profits and bonus performance.

It called on firms to strengthen governance, to better identify benchmarks across all areas of business from derivatives to commodity trading and to train staff on proper procedures.