BANK OF ENGLAND DEPUTY GOVERNOR CALLS FOR US CO-OPERATION OVER BANK FINES

The deputy governor of the Bank of England has called for better co-operation with US regulators over the scale of fines being levied on banks to ensure they do not weaken their financial position.

Andrew Bailey said he wanted a “cards on the table” approach from regulators around the world.

“I am trying to build capital in firms and it’s draining out the other side (in fines and penalties),” Bailey said at a banking conference.

Regulators in the US levy largE penalties than their UK counterparts, which on Tuesday fined Barclays £38m for failing to keep its clients’ money separate from the bank’s own assets – a record for that offence. When Barclays was fined £290m for rigging Libor in 2012, just £87.5m was levied by the UK regulator.

Since then, HSBC has been fined £1.2bn for breaching money laundering rules in the US while French bank BNP Paribas has been fined £5bn for dealing with countries that were subject to sanctions. Bailey’s intervention came as the Financial Conduct Authority accused Barclays of failing to learn the lessons of previous crackdowns on the financial industry after finding significant weaknesses in the bank’s systems.

The FCA said all firms needed to heed warnings put in place after Lehman Brothers collapsed in 2008 about keeping their clients’ money and assets separate from their own.

Barclays failed to do this and risked putting as much as £16.5m at risk for clients between November 2007 and January 2012 when it opened 95 custody accounts in 21 countries.

It is the second time Barclays has been fined for failing to protect customers’ cash. It was fined £1.1m in 2011 for similar misconduct.

Tracey McDermott, the City regulator’s director of enforcement and financial crime, said: “Barclays failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk. All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets.

Barclays received a 30% discount on a proposed £54m penalty for agreeing to settle.

In May the bank was fined £30m for fixing gold prices, and it is fighting allegations of fraud made by the New York attorney general over how it marketed its “dark pool” trading system.

The City regulator also wants to fine Barclays £50m for reckless behaviour during its rescue fundraising in 2008, but the bank is fighting this claim. The Serious Fraud Office also investigating the fundraising.