FSA hands down record fines of £312m in 2012

Regulator handed down a record  £312m in fines this year so far, according to law firm Reynolds Porter Chamberlain (RPC).

The fines have smashed the previous record of £89m, set in 2010, beating it by 251%.

The news comes as the regulator is expected to increase its scrutiny of the UK insurance industry next year.

According to RPC, the fines would have been much higher, but 71% of the businesses and individuals fined by the FSA received a discount for cooperating with the FSA. Without any discounts, the fines in 2012 would have amounted to £411m.

The FSA will cease to exist on 1 April 2013. It will be replaced by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

RPC Partner Richard Burger said: “The FSA will cease to exist next year but it has managed to ratchet up its fines to record levels as it bows out.

“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. It is willing and able to use fines and restitution orders to send hard messages to financial services firms.”

RPC pointed out that the FSA fines tally is dwarfed by the restitution costs to financial services firms for  mis-selling payment protection insurance (PPI). FSA figures show that more than £7.5bn has been paid by banks to customers so far in PPI compensation payouts.

Burger said: “FSA fines send a loud message to the market, but it’s the huge restitution schemes ordered by the FSA that make a fundamental difference to a business. The restitution costs for PPI mis-selling are so high that they have actually impacted banks’ balance sheets, potentially affecting their lending capacity.

“The banks will probably be more nervous about the FSA ordering them to compensate small businesses for interest rate swap mis-selling next year than about further fines.”

He added: “There are important policy reasons for fines, especially after the serious failings of financial services businesses, but it is important the new regulators don’t get carried away and harm the competitiveness of the UK’s financial services sector.”