Interbank offered rates

Banking reform

Mis-selling insurance products

Interbank offered rates

The Financial Conduct Authority (FCA) continues to investigate and resolve issues arising from allegations of manipulation of the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor).

A final notice issued to Deutsche Bank (announced on April 23 2015) required it to pay a fine of £226,800,000 for serious misconduct, in particular for failing to deal with the FCA in an open and cooperative manner. The allegations that were being investigated by the regulator included failings in the bank's systems and controls and attempts to manipulate Libor and Euribor submissions between 2005 and 2010.

In March 2015 the FCA announced its first action against a trader for manipulating Libor submissions. The trader, who was employed by Rabobank as the primary submitter for Yen Libor, was banned for lacking honesty and integrity. He had previously pleaded guilty in the United States for his role in a conspiracy to manipulate the benchmark. He will be sentenced in 2017.

On January 22 2015 the regulator announced that it had fined and banned two former senior executives of Martin Brokers (UK) in relation to compliance and cultural failings at the company (the FCA had previously fined the company £630,000 for Libor-related misconduct). They were fined £210,000 and £105,000 respectively as a result of failings that contributed to a culture at the company that permitted Libor manipulation to take place and to continue unchecked for a significant period.

Banking reform

The FCA has set out how it proposes to implement the Senior Managers Regime and Certification Regime as well as information on the new Conduct Rules. It has also announced that it intends to consult further on how the 'presumption of responsibility' will be applied to senior managers in practice and what senior managers would need to do in order to rebut the presumption in particular cases. These measures are intended to further the principles set out in the 2013 Parliamentary Commission for Banking Standards report entitled "Changing Banking for Good" and in the implementation of the Banking Reform Act 2013, which aims to promote responsibility within the financial services sector.

Mis-selling insurance products

The FCA also remains active in monitoring and fining companies accused of mis-selling additional insurance products in a variety of sectors.

On April 23 2015 it announced that it had imposed a fine of £159,300 on Moorhouse Group Limited for failures in relation to the oversight and control of its telephone sales, regarding the sale of commercial vehicle add-on insurance products during 2012.

On April 14 2015 it announced that it had fined Clydesdale Bank Plc £20,678,300 for serious failings in its payment protection insurance complaint handling processes between May 2011 and July 2013. This marks the largest fine ever imposed by the FCA for failings relating to payment protection insurance. The size of that fine was indicative of the fact that the bank provided false information to the Financial Ombudsman Service in an attempt to limit the scope of its misconduct.

These announcements coincide with recommendations made by the FCA that opt-out selling of insurance add-on products should be banned in order to ensure that customers are aware of the financial products that they have purchased and ensure that they are appropriate in the circumstances.

For further information on this topic please contact Kathleen Harris, Michael Atkinson or James McSweeney at Arnold & Porter LLP by telephone (+44 20 7786 6100) or email (kathleen.harris@aporter.com, michael.atkinson@aporter.com or james.mcsweeney@aporter.com). The Arnold & Porter website can be accessed at www.arnoldporter.com.

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