126 million reasons why banks have to work harder to fall into line ......

Thursday 16th April 2015

126 million reasons why banks have to work harder to fall into line ......

"Fines fail to spur banks into action on client cash" , The Financial Times , p.17

The UK's regulatory body the FCA has fined Bank of New York Mellon £126m for failing to properly ringfence client accounts, which is to say allowing the "commingling" of client assets and a bank's proprietary funds. This is by far the largest of the fines handed out to a total of 17 companies for this particular offence, and is intended to ensure that there is no repeat of the situation that followed the collapse of Lehman Brothers, some of whose former clients are still in court in an attempt to get their money back. Plainly, the FCA is concerned that despite fines of over £30m previously imposed on Barclays and J.P. Morgan for example, the message is not getting through.

 In fairness, few believe these contraventions to have been deliberate. In BNY Mellon's case, a small amount of bank assets found its way into client omnibus accounts rather than the other way around, and no client lost money. The main problem seems to be that as banks consolidate and differing systems have to merge, misplacement of assets can occur. Moreover, lawyers argue that the regulatory diktats are less than clear. It matters not a jot. In this environment regulators are playing hardball and are unlikely to listen to any pleas in mitigation. Indeed, things are about to get tougher with plans afoot to make senior managers accountable. Banks, and bankers, need to know that nothing but absolute compliance will suffice.