Misbehaving Bankers Threaten System, BOE’s Bailey Says

Bank of England Deputy Governor Andrew Bailey said banks’ misconduct risks undermining the entire financial system following increasingly large fines.

Misbehavior has “broader consequences,” Bailey, who leads the central bank’s Prudential Regulation Authority, said in an interview in London today. “The risk of loss of confidence in the integrity of financial markets is very, very big. This threatens a vital underpinning of the system.”

Banks’ losses from fines and sanctions are starting to rival the hits they took in the midst of the 2008 financial crisis. BNP Paribas SA was fined a record $8.97 billion last month by U.S. regulators for processing billions of dollars in banned transactions involving Sudan, Iran and Cuba. JPMorgan Chase & Co. posted its first quarterly loss under Chief Executive Officer Jamie Dimon’s leadership last year as it agreed to pay $23 billion in penalties and settlements.

At least nine firms have been fined more than $6 billion for manipulating benchmark interest rates such as the London interbank offered rate, with the investigation yet to finish.

Bailey, who is tasked with leading an overhaul of the U.K. system of bank supervision, said regulators are still dealing with issues dating back to the 2008 financial crisis.

“We’d all love to be saying ‘we’re in the new world now, let’s get on with it’ but we are still dealing with issues that have their roots in the past,” he said. “You wouldn’t be human if you didn’t say sometimes ‘I wish we could get this legacy past us.’ It’s not our choice, we don’t have that luxury.”

(Corrects to say BNP Paribas was fined last month in third paragraph of story published July 10.)
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