Regulators fine five banks for fx faiings: FCA and the US Commodity Futures Trading Commission (CFTC) have fined five banks more than $3 billion for failures in their fx trading operations. FCA fined Citibank N.A. £225,575,000, HSBC Bank Plc £216,363,000, JPMorgan Chase Bank N.A. £222,166,000, The Royal Bank of Scotland Plc £217,000,000 and UBS AG £233,814,000. CFTC fines on the five banks totalled over US$1.4 billion. FCA is continuing an investigation into Barclays' practices, and is also launching an industry-wide programme to ensure firms take appropriate remedial action to attack the causes of the failings and improve industry standards. FCA found that ineffective controls at the banks in relation to their G10 spot fx trading over a period of nearly six years:

  • allowed traders to put their banks' interest ahead of anyone else's;
  • did not manage risks around confidentiality, conflicts of interest and trading conduct; and
  • enabled traders to share confidential information about clients and to try to manipulate rates, sometimes in collusion with traders at other banks.

FCA worked closely with not only the CFTC but also FINMA, the Swiss regulator, which has disgorged CHF 134 million from UBS. Among the factors on which it based its fines, the highest ever, was the need to stress to the industry the importance of learning lessons about dealing with these kinds of risks, which had arisen under the LIBOR investigations. 

FCA said its remediation programme will require firms to review policies and procedures to ensure they effectively manage their risks, and conflicts of interest. The scope of the review may extend to fx emerging markets, sales, derivatives and structured products referencing fx rates and precious metals. FCA will also ask senior management of firms to attest they have taken necessary action and that their firms have systems and controls that are adequate to manage the risks. (Source: Regulators Fine Five Banks for Fx Failings)

FCA makes new rules: At FCA's September and October Board Meetings it made minor changes to its rules on:

  • reporting of product sales data and integrated reporting requirements. These changes to the Supervision Manual (SUP) took effect on 1 October and will take effect on 1 January 2015 in relation to Product Sales Data reporting and 31 December 2014 otherwise; and
  • remuneration data collection. These changes to SUP and the Senior Management Arrangements, Systems and Controls Manual (SYSC) took effect on 7 November.

(Source: FCA Makes New Rules)

FCA makes new rules on high-cost short-term credit: FCA has finalised its rules imposing a price cap on high-cost short-term lending. It has proceeded in line with its proposals so there is now:

  • an initial cost cap of 0.8% per day that fees and interest for all high-cost short-term credit loans must not exceed;
  • fixed default fees of £15 with interest on unpaid balances and default charges not exceeding the initial rate; and
  • a total cost cap of 100% so borrowers will never have to pay back more in fees and interest than the amount they borrowed.

Additionally, no borrower repaying a 30-day loan on time can pay more than £24 in fees and charges per £100 borrowed.

The rules take effect from 2 January 2015 and FCA will review them after a further two years. (Source:FCA Makes New Rules on High-Cost Short-Term Credit)

FCA speaks on mortgage lending: Linda Woodall has spoken on mortgage lending after the implementation of the Mortgage Market Review (MMR) rules. She said it is too soon to assess its impact but FCA has noted significant trends in lending less in certain circumstances, including a severe decrease in interest-only lending. She stressed FCA appreciates this can sometimes be a sensible option. She discussed FCA's thematic work. Its current work is assessing firms' mortgage advice processes and strategies and testing firms' monitoring and oversight procedures. She also looked at the changes FCA will need to make to its rules to implement the Mortgage Credit Directive (MCD). Finally she touched on the difficulties of older borrowers getting a mortgage and the moves to increase the mortgage interest rate stress test. (Source: FCA Speaks on Mortgage Lending)