Libor cases lift UK FSA fines to record $507 mln

LONDON Fri Dec 21, 2012 6:52am EST

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LONDON Dec 21 (Reuters) - Fines levied by Britain's financial regulator total a record 312 million pounds ($507 million) this year after Barclays and UBS were hit with hefty penalties for rigging a benchmark interest rate.

The figure showed how the Financial Services Authority, slammed for its "light touch" before the financial crisis, had found its teeth just as it headed for the history books, law firm RPC said on Friday.

The previous record for fines was 89 million pounds in 2010.

The FSA will be scrapped in April, replaced by the Financial Conduct Authority to oversee enforcement as part of a wider supervisory shake up to learn from the crisis.

"The FSA was raked over the coals for not being tough enough in the run up to the credit crunch, but these record fines show that it is now a very different organisation," RPC partner Richard Burger said on Friday.

The FSA fined Swiss bank UBS 160 million pounds on Wednesday as part of a joint $1.5 billion settlement with British, Swiss and U.S. regulators for manipulating the London interbank offered rate (Libor).

It fined Barclays 59 million pounds in June for rigging Libor. Royal Bank of Scotland was expected to settle similar charges early next year.

The FSA's total for this year was less than the $700 million penalty the U.S. Commodity Futures Trading Commission levied on UBS this week.

The FSA has also hit firms hard by insisting on full and prompt compensation for mis-selling, with banks set to collectively pay out 12 billion pounds to customers who bought payment protection insurance (PPI).

The Bank of England, which replaces the FSA as Britain's banking regulator in April, has asked lenders to top up their capital because of Libor fines and mis-selling compensation.

"The restitution costs for PPI mis-selling are so high that they have actually impacted banks' balance sheets, potentially affecting their lending capacity," Burger said.

Since around 2007, the FSA has taken a harder line against market abuses, resorting to criminal courts for stiffer penalties rather than just pursuing civil cases.

The government approved a law this week that will require the FSA's fines, after costs, be given to the treasury.

"They will get plenty of money," FSA director of enforcement Tracey McDermott told Reuters this week, signalling no let up in chasing market abusers when she moves to the FCA in April.

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