The Financial Services Authority (FSA) is due to report today that the average size of its fines in the past year rose 23% to £216,800 as it sought to deter wrongdoing with high-profile enforcement actions reports the Financial Times.
The paper claims FSA officials say the regulator has won grudging respect from many of the businesses it regulates. But they want to use bigger fines to ensure the FSA's enforcement arm inspires a greater degree of dread in the City.
In spite of the rising penalty rates, which will be confirmed when the regulator's annual report is released today, some financial services groups shrug them off as a cost of business.
The FSA levied fines of £3.5m on 16 individuals or companies in the year to the end of March, compared with fines of £5.3m for 30 individuals or companies in the previous 12 months.
The figures exclude one massive fine in each year: Citigroup paid almost £14m for its "Dr Evil" eurozone bond trade and Royal Dutch Shell was fined £17m over its oil and gas reserves misstatement.
The FSA sees bigger fines as one of the best ways of making sure the regulator is taken seriously - if not feared - as is the Securities and Exchange Commission in the US.
But enforcement officials have struggled to win support for big fines from the internal regulatory decisions committee, which reviews enforcement cases, and the Financial Services and Markets Tribunal, which hears appeals.
One of the watchdog's priorities is to crack down on market abuse perpetrated by hedge funds, prime brokers and other financial institutions or their staff.
The FSA's enforcement processes have received a lot of flak from the City. But it has been criticised more for being unfair and reaching the wrong conclusions than for levying oversized fines.
Regulated businesses also resent the reputational damage inflicted by FSA publicity about cases that result in punishment. The watchdog overhauled its approach to enforcement after a tribunal criticised its handling of a pensions mis-selling case against Legal & General.
Subsequent changes have been largely welcomed in the City.
The FSA suffered a setback at the FSMT last month when Paul Davidson, known as "the plumber", was cleared of market abuse in a case pre-dating the enforcement review. Enforcement officials say they do not like to lose but add that they would not be doing their jobs if they only took on cases in which they were sure of victory.
CENTRAL BANKS around the world may need to raise interest rates further to ensure that inflation remains under control, the Bank for International Settlements warned yesterday, reports the Guardian.
It says although the Federal Reserve and the European Central Bank have been raising rates for some time there is growing concern in financial markets that the threat of inflation has not yet been curbed as the booming world economy raises the price
Releasing its annual report, the Basle-based organisation of central banks said it shared those worries as well as rising unease over imbalances in the world economy stemming from the large US current account deficit and China's growing trade surplus.
The Fed, for example, has raised rates from 1% two years ago to 5% now and it is widely expected to up them for the 17th time this week, to 5.25%. The ECB has increased borrowing costs three times since December, to 2.75%, much less than the Fed, given the far slower economic growth in the 12-nation eurozone than in the US. Inflation has remained stubbornly above the ECB's 2% ceiling, however.
The BIS noted that the expert consensus was for another year of strong global growth in 2006 with low inflation. But it pointed to some risks, including large budget deficits in many countries, low savings and investment levels in some, and the current account imbalances, especially between China and the US.IFAonline
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till