FCA fines - is the only way up?

Posted: 11th December 2013

The regulator has made headlines in recent years by issuing and publishing large fines. Whilst improved communication and transparency from the regulator is welcomed by firms, reputational impact and financial penalties can have real profit implications for firms.

Industry prediction

A year before the Financial Conduct Authority (FCA) started to regulate firms, Huntswood asked senior financial services stakeholders for their view on the change in regulator ahead. In line with their view that the intensive and intrusive FCA would be more challenging than its predecessor, nearly three quarters (74%) of the industry stakeholders expected an increase in the number of fines and 55% expected an increase in the value of those fines.

Now and then

That expectation has been now fulfilled. 2012 was a year of record of fines for the then Financial Services Authority (FSA) finishing at £312m. With the FSA’s fines from January to April, 2013’s total already stands at £471m; in its nine months leading the new regime alone, the FCA has reached £331m including today’s announcement now beating the FSA’s 2012 figure. Looking back, fines have more than quadrupled from 2010 levels (£89m) and are considerably larger than the £10m 10 years ago.

Is bigger always better?

These sums show the new regulator is making good on its promise to act when it sees wrong. Whilst it may seem that an active regulator is a fining regulator, we should note that the regulator’s new approach is to be proactive and intervene early. If this is successful, the level of fines should in theory reduce over time. Of course, responsibility for the issues leading to enforcement sits with firms and not the regulator. However, with a healthier firm approach to customer outcomes and a proactive regulator, It’s a nice thought, at least.