The FSA handed down a record-breaking £312 million in fines in 2012 (to December 19), smashing its previous record of £89 million (in 2010) by 251%, says City law firm Reynolds Porter Chamberlain.

RPC explains that 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.

Richard Burger, partner at RPC, comments: “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 points out that the FSA fines tally is dwarfed by the restitution costs to financial services firms for PPI misselling. FSA figures show that over £7.5 billion has been paid by banks to customers so far in PPI compensation payouts.

Burger says: “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.”

“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.”

RPC explains that the FSA is expected to cease to exist on April 1st 2013, and will be replaced by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

Burger continues: “My concern is that competition between the new regulators that take over from the FSA next year will mean that fines against financial services businesses will rocket even further, harming the City’s international competitiveness.”

RPC adds that heavy fines for Libor- and Euribor-rigging have driven the FSA record fines. The FSA’s £160 million fine of for UBS last week and its £59.5 million fine of Barclays in the summer were its two highest ever fines.

Says Burger: “The two huge fines for rate-rigging will be followed by several others next year, which means we could see another record year of fines for financial services businesses.”

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