EU bid to impose tougher penalties on bankers who break rules

PENALTIES for breaking rules on the kind of financial services that led to the economic crisis are as little as €100,000 in some countries, according to a study carried out in the EU.

But in future bankers, insurance companies and others providing financial products could face prison or fines of several million euro under proposals outlined by the European Commission.

Internal Market Commissioner Michel Barnier said that while he does not intend to harmonise penalties throughout the EU, he wants them to be similar.

The investigation found that some member states had not applied any sanctions in the banking sector for years while the authorities in other countries were much more active.

Several countries do not even have sanctions for certain types of violations and most do not provide for the disqualification or dismissal of management or a supervisory body in cases involving market manipulation.

On fines the range goes from unlimited to more than €1 million in some states to less than €150,000 in seven countries. Luxembourg, Austria, Germany poland and Belgium were among the 12 countries where, the Commission said, applied low fines in banking and insurance.

The Commission wants a common minimum standard set at European level for certain issues that are key for proportionate and deterrent sanctioning regimes, such as not respecting financial services rules and the publication of sanctions.

On the basis of a public consultation on the issue launched by the Commission yesterday, it will decide on how to reinforce the sanctioning regime to be applied nationally by three committees of supervisory — Banking, Insurance and Occupational Pensions and Securities Regulators.

Commissioner Barnier also announced a comprehensive review of the three year old Markets in Financial Instruments Directive (MiFID). Introduced by the then commissioner Charlie McCreevy it was designed to open up trading for investment firms and investors. However, while helping provide more competition, economies of scale, a greater variety of providers and cheaper services for investors, it has also led to some problems. This includes trading in what are called “dark pools” — private venues that do not display prices in advance and are blamed for contributing to financial instability.

Mr Barnier said that financial markets have changed substantially since MiFID came into force with technological developments, such as high frequency trading, new types of trading venues and new products and these have revealed the directive’s shortcomings.

He intends to revise it next year to make it more transparent and provide more protection for investors. “I want to know who is doing what. We are covering a large number of speculation risks. The rule is transparency,” he said.