The U.K. finance regulator doesn’t need the power to prosecute executives at banks that fail or take bailouts because such matters are unlikely to be criminal, the agency told lawmakers.
Bank failures are most often due to mismanagement rather than deliberate wrongdoing, the Financial Services Authority said in a written response to questions from the Parliamentary Commission on Banking Standards, published today.
“The causes of a major bank failure are always likely to be complex and include a combination of decisions made within the bank and inextricably linked to external events,” the FSA said.
The regulator is “not convinced” that bankers would act more cautiously in taking risk or that the public would have greater confidence in authorities’ ability to take action against mismanagement if it had the power to criminally prosecute them because it would rarely be used.
Instead, the FSA said it would prefer stronger regulatory powers. In September, it told the committee it would like an extension of the three-year statute of limitations on probes and the ability to temporarily ban senior managers from their jobs while they’re under investigation.
The regulator also disclosed that it spent around 10.9 million pounds ($16.5 million) pursing two civil cases that included penalties against former bank executives. One resulted in a 500,000-pound fine against Peter Cummings, a former HBOS Plc banker, over the aggressive expansion of corporate lending that led to its near-collapse.
In the other case, the FSA fined UBS AG and several individuals over unauthorized trading in its wealth-management unit in London. The FSA lost part of the case, against former unit Chief Executive Officer John Pottage, for not heeding warning signs of ineffective risk controls before the trading was discovered. Pottage challenged the regulator at a tribunal in London and had a fine overturned.
The FSA’s enforcement budget has risen to 51.1 million pounds for the upcoming year from 36.4 million pounds in the fiscal year ending in 2011, driven by an increased headcount, the agency said.
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