FINANCIAL INSTITUTIONS LITIGATION AND THE UK’S EVOLVING REGULATORY LANDSCAPE
Largely attributable to the havoc wrought on the financial sector by the LIBOR and Forex (FX) market manipulation scandals, among others the UK regulatory landscape has now become a much more stringent animal which, in turn, has had a significant impact on the litigation practices and strategies being deployed by financial institutions, and those who represent them.
Litigation, of course, is an expensive arena for financial institutions to enter. According to data compiled by the CCP Research Foundation, since 2010, litigation costs for the world’s 16 largest banks have amounted to a mammoth £205.6bn of fines, settlements and provisions – a figure which is likely to do nothing but increase exponentially.
Over the past few months, UK Courts have overseen a number of market manipulation accusation cases, including 10 former bankers from Barclays and Deutsche Bank charged by the Serious Fraud Office (SFO) with conspiracy to defraud in connection with the Euribor interest rate benchmark, and six brokers that allegedly conspired to assist ex-bank trader Tom Hayes in his manipulation of the LIBOR interest rate benchmark.
Reflecting on a sector in dire need of reform, in November 2015, Bank of England governor Mark Carney told a meeting of policymakers, academics and senior bankers in central London that the “age of irresponsibility” in the City was now at an end and that financial services reforms, as well as tighter financial market regulation, were essential if the UK was to continue as a leading international financial sector.
Much of the massive recompense now being extracted from institutions found guilty of financial skullduggery is as a result of a far more aggressive and punitive regulatory backdrop – an evolution most visibly exemplified by the new competition powers and enforcement priorities afforded to the Financial Conduct Authority (FCA) and the SFO.
Jan-Mar 2016 issue
Fraser Tennant