So there was a tweet going the rounds this morning which said that the £59.5 million of fines which Barclays are going to pay for attempting to manipulate the LIBOR and EURIBOR rates of interest will go direct to the FSA… and reduce the fees which banks pay to the FSA for being regulated!
Let’s have a quick look. The FSA website explains they are independent, receive no government funding, and charge fees to those they regulate and, yes, if you look at the paragraph “Who Pays for the FSA” you will see what they do with any fines they receive.
When financial penalties are imposed on firms or individuals, the proceeds are used to reduce fees in the following financial year.
So no worries, boys! Be naughty this year, you’ll pay us less the next! Champagne cocktails all round.
However there is this:
The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 2012.
Yes, the FSA is going to be wound up. At the moment, according to their annual report and accounts, they already have funding in place to cover the transitional costs of the transfer of responsibilities to the new Financial Conduct Authority and Prudential Regulation Authority that will take over their function. So what becomes of the £59 million?
Well, under Schedule 21 Part 1 Para 2 of the Financial Services Bill (HL Bill 25) which seems to be working its way through the House of Lords at present it looks to me as if the FSA has to sort it out with the Bank of England and the Treasury:
Transfer schemes
2(1)The FSA must make one or more schemes under this paragraph for the
transfer of property, rights and liabilities of the FSA—
(a)to the PRA or the Bank,
(b)to the PRA and the Bank, to be held jointly, or
(c)to the FSA and either the PRA or the Bank or both, to be held jointly.
(2)A scheme under this paragraph made by the FSA is not to be capable of
coming into force unless it is approved by the Treasury.
(3)The FSA may not submit a scheme under this paragraph to the Treasury for
their approval without the consent of the Bank.
So perhaps one of the Noble Lords might like to check that our £59.5 million – as well as any other fines that might accrue from any other ramifications of what looks set to be a fair old scandal – go back to us, the taxpayers, rather than indirectly benefiting the people whose offences caused the fine.
If you want to ask a Noble Lord to do so, go to this list of members and pick one – they don’t have constituencies like MPs, so you’re entitled to ask any of them. I picked the one with my surname (no relation!) but you might someone you’ve heard of who might have an interest, or simply pick one at random. And then ask them to take an interest. I want our money back!
UPDATE
World’s shortest campaign (or maybe “great minds think alike” – no) but George Osborne picked up the same thing in his speech on Barclays today.
Here’s what he said:
Under the previous government’s regime fines paid to the FSA are used to reduce the annual levy other financial institutions are asked to pay.
I am far from convinced that in all cases, this is the best use of the money.
We are considering amendments to the Financial Services Bill that ensure that fines of this nature go to help the taxpaying public, not the financial industry.
I have also asked my officials to urgently investigate whether this legislation could be applied to the fine imposed on Barclays Bank.
Well well – evidence that even politicians are capable of going “that’s really stupid – let’s not”.
tiintax 