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FCA to look at Libor probe controls

Banks face fresh scrutiny over the Libor-rigging scandal after the City watchdog said it would look at whether firms have put in place adequate controls to prevent traders from repeating the manipulation of benchmark interest rates.

The Financial Conduct Authority (FCA) said it would assess whether lessons had been learned from the episode as it published its business plan for 2014/15.

It comes as the FCA's chief executive Martin Wheatley faces pressure over an "extraordinary blunder" in releasing market-sensitive information about an insurance industry probe which resulted in shares plunging last week.

The business plan also revealed that the regulator's budget would increase by 3.3% to £446.4 million, as it takes on wider responsibilities.

Its key announcement on Libor-fixing relates to the scandal over the manipulation of benchmark interest rates - used for hundreds of trillions of dollars-worth of transactions around the world - which has seen banks fined billions of pounds.

The sector has since become immersed in a further set of allegations, this time over foreign exchange rate fixing - which Mr Wheatley has described as "every bit as bad" as the Libor scandal.

The FCA today said it would look at whether firms had "learnt lessons from Libor and other recent controversies and ask if adequate controls on traders' behaviour and activity are now in place to prevent future manipulation of benchmarks".

Mr Wheatley said: "Following widespread attempted manipulation of Libor, firms should ensure that traders are not able to act in this way in the future.

"We are determined that firms need to take the matter of manipulation of any benchmark seriously and will be working with firms to seek out any issues that may remain."

Nine people face charges in relation to alleged Libor-fixing in the UK.

The FCA said it would also probe investment banking, including conflicts of interest, and the issue of ensuring that confidential information received in one part of a business is not abused by another.

Meanwhile, the regulator reiterated how it would also focus on consumer credit, visiting the top five payday lenders to check they were following new rules.

Mr Wheatley said: "Using our new power we want to tackle harm to consumers who are most at risk and our work will focus on protecting vulnerable customers."

The latest announcement comes after the FCA confirmed last Friday that it was planning an inquiry into 30 million financial policies sold between the 1970s and the turn of the millennium amid fears over "rip off" charges and substandard services.

Details of the probe, disclosed in a newspaper interview, sent shares in insurance firms tumbling - after they had already been hard hit by pensions reforms announced in the Budget.

Andrew Tyrie, chairman of the Treasury select committee, said the way in which the market sensitive information was released was an "extraordinary blunder", and called for a full explanation about how the apparent mistake could be made by the watchdog.

The FCA said its board had called in external law firm to conduct an investigation into its handling of the issue.


From Belfast Telegraph