The end of 2014, a year in which global regulatory authorities and law enforcement agencies concentrated resources on bringing six banks to book over FX benchmark manipulation, did not signal the end of the penalties which continue to be applied to banks and individual traders.
As last year drew to a close, regulatory authorities in Britain, Switzerland and the United States concluded their cases against six banks, resulting in a $4.3 billion collective fine, however the repercussions are continual as the banks cut their bonus pools substantially after deducting part of the fines paid for the FX manipulation.
According to a report by Bloomberg, the cost of appeasing regulatory authorities following the FX rate manipulation fines has affected bonus pools at large firms with Deutsche Bank and Barclays Plc, which were also hurt by lower fixed-income trading income and the European Union’s cap on compensation.
In terms of those affected by the reduced remuneration, bonus pools are often company-wide, therefore it is unlikely that in addition to currency traders being affected, this will apply to all executives at the large banks.
In December, RBS took an active stance and suspended payment of annual bonus to eighteen staff, with Jon Pain, Head of Conduct and Regulatory Affairs at RBS having stated that “No further bonus payments will be made or unvested bonus awards released to those in scope of the review until it has concluded and its recommendations have been considered.”
Regulatory officials were also subject to chastisement, with Financial Conduct Authority (FCA) having been the subject of a scathing report by Simon Davis of law firm Clifford Chance, lambasting the FCA’s recent methods of handling large scale transgressions within the financial services sector.
As a result of this, a senior level restructure was brought about, and it was expected at the end of last year that CEO Martin Wheatley would forfeit the entirety of his annual bonus, along with four senior colleagues at the FCA. The magnitude of this is significant, with Mr. Wheatley having been awarded an £86,000 annual bonus in 2013, taking his salary up to £628,000.