LONDON Oct 25 Tougher jail sentences would help
Britain crack down faster on market abuse, such as the rigging
of the Libor interest rate, by encouraging suspects to
cooperate, the head of Britain's financial watchdog said.
Disgraced former Goldman Sachs director Rajat Gupta was sent
to prison in the United States for two years on Wednesday for
what the judge said were "disgusting" insider trading crimes.
Martin Wheatley, managing director of Britain's Financial
Services Authority (FSA), was challenged by a panel of UK
lawmakers on Thursday over why the United States appeared better
able to tackle insider trading.
"We are being robust. We have sent 20 people to jail in the
last three years for insider trading offences," Wheatley said.
But the U.S. system differed in two key ways: it allows for
the bugging of suspects' telephone lines, and sentencing is
harsher, prompting people to turn state witness, he said.
"If the sentencing was higher we would have more people
coming forward to us to want to cooperate with us, and that
level of cooperation is what allows us to cut through these
things quickly," Wheatley said.
The lawmakers sit on a parliamentary commission that will
make recommendations, such as changing laws, to improve
standards in banking after years of mis-selling and abuses such
as the rigging of the London Interbank Offered Rate or Libor.
Barclays was fined a record 290 million pounds for
rigging Libor and Royal Bank of Scotland is expected to
be next in line for punishment.
Wheatley expects individuals, and not just the banks, to be
pursued over Libor rigging, but such cases will take time.
The FSA will be scrapped on April 1 and Wheatley will head a
new Financial Conduct Authority, part of efforts to end the
"light touch" supervision seen before the 2007-09 financial
crisis, such as through banning harmful products.
He backed the suggestion that banks should offer a suite of
simple financial products that are easy for people and
regulators to understand.
But he was sceptical that changes to the law were needed to
end "skewed" incentives for banks to sell pricier and unsuitable
products as this was already being tackled in other ways.
"I am not aware of any statutory intervention that would be
a significant step forward from where we are," Wheatley said.
The lawmakers want more competition in a banking sector
dominated by four lenders and Wheatley said he would propose
ways of making it easier and less costly to enter the market.
"We will come out with something we think is much more
practical," he said.
There could be a "staged" process of approving a new entrant
by giving some initial certainty the application is likely to be
approved so that it's worth the cost of recruiting a chief
executive and building up capital reserves, he said.
Still, only 2 percent of account holders switch lenders as
most customers fail to find anything better, said Wheatley.
He will monitor whether customers should be allowed to take
their account numbers to another bank, as can be done with
mobile phone numbers when switching operators.
"I don't believe legislation or directing the end of free
banking is an answer," he added.