LONDON May 6 Britain is to review whether punishments for bankers who break the rules are tough enough to deter others from doing wrong in the financial markets, where there are currently allegations of possible rigging of currency rates.
Politicians have criticised British financial regulators for being softer than their counterparts in the United States in terms of the size of fines imposed on offenders. They have also been criticised for failing to bring individuals and not just their employers to book.
"For enforcement action to be effective, wrongdoers must believe that they face a real and tangible risk of being held to account and must expect to face meaningful and proportionate sanctions," Britain's finance ministry said in a statement on Tuesday announcing the review.
"The general public must also have confidence that wrongdoers will be subject to sanctions and that the enforcement machinery will be robust enough to deliver those sanctions when wrongdoing occurs," the statement said.
After the financial crisis, British financial regulation was revamped to create two new watchdogs, the Prudential Regulation Authority (PRA) at the Bank of England, and the standalone Financial Conduct Authority (FCA).
The FCA has fined banks for manipulating the London Interbank Offered Rate or Libor, a widely-used benchmark. It is investigating potentially similar rule-breaking in foreign exchange markets.
The government's review will look at the how the two watchdogs decide on enforcement action and will report to Britain's Finance Minister George Osborne by the autumn.
It will also look at what goes on in other countries.
The two watchdogs were formally launched in April 2013 and the government said it was a good time to see if they are effective in enforcement work.
The review will look at whether stronger incentives are needed to encourage early settlement of cases, and if the current system provides a credible deterrence to rule breakers.
A public call for evidence was published on Monday with a July 4 deadline, and round tables will be held with interested parties next month. (Reporting by Huw Jones. Editing by Jane Merriman)