Treasury Select Committee

FSA Challenges Accusations That It Was Slow on LIBOR Scandal

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On February 21, the Treasury Select Committee published the FSA’s response in relation to its August 2012 report on LIBOR.  The report had criticized the FSA for being behind the US regulator in formally investigating market rumors relating to the artificial rigging of LIBOR rates and made several recommendations for improvement in the future.

In its response, the FSA challenges accusations that it was too slow to investigate the manipulation of LIBOR rates, stating instead that it had worked closely with the Commodity Futures Trading Commission since 2008 to examine allegations of rate-rigging.  The FSA noted that it has increased the intensity of its supervision since 2008, and will continue to do so following the separation into a “twin peaks” regulatory system.  The FSA also disputes the view that it interpreted its powers to initiate criminal proceedings for fraud in relation to rate-fixing too narrowly, and instead reiterates its mandate to consult with the Serious Fraud Office (and other prosecutors where necessary) where there is evidence of offences which are beyond the scope of its own powers of investigation.

Treasury Committee Publishes Report on the Financial Services Bill

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On 8 June, the Treasury Select Committee published a report setting out its main concerns on the Financial Services Bill. Report.

In particular, it called for amendments to the Bill which would:

  • Oblige the Court of the Bank of England to undertake retrospective reviews of the Bank of England’s performance;
  • Give a general power to the Chancellor of the Exchequer to direct the bank of England when public funds are at risk;
  • Make competition an objective of the Prudential Regulation Authority;
  • Ensure Parliament, through the Treasury Committee, may request retrospective reviews of the work of the Financial Conduct Authority’s (“FCA”).

It also considered whether the Treasury Committee should have a role in the appointment and dismissal of the Governor of the Bank of England and whether there is a way of requiring the FCA to publish board minutes. It welcomed the House of Lords to re-examine these issues. The second reading of the Bill in the House of Lords will take place on 11 June 2012.

FSA Investigating Mis-selling of Swaps to SMEs

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On 23 May 2012, the Treasury Select Committee published a press release on correspondence between its chairman, Andrew Tyrie, and Lord Turner, chair of the FSA, and Sir Nicholas Montagu, Financial Ombudsman Service (FOS) chairman, on the potential mis-selling of interest rate swap products to small businesses by major banks. In his letter, Lord Turner stated that the FSA is “doing more work to understand…the types of products that have been sold” and that if the FSA finds “widespread evidence” of breaches of its rules or mis-selling it “will take action”. Press Release and Correspondence.