My Lords, I rise briefly to speak in support of Amendment 13, proposed by the noble Lord, Lord Sharkey, and to which I have added
my name. He has raised a very important point in relation to how the discount is applied and we are all very grateful to him. He has made a compelling case, and I should like to make a couple of comments in this context.
Since the financial crisis, $321 billion has been paid out globally in fines, compensation and legal costs, and the UK has contributed some $60 billion of that. KPMG reported in 2015 that, between 2011 and 2015, 60% of bank profits had been paid in fines, compensation and legal costs. Since the financial crisis in general, payouts in legal fees, fines, compensation and bonuses are basically equivalent to the entire profits generated, with all the consequences for shareholders, corporate governance, the reputation of the financial sector and losses to the taxpayer. At its very core, the attempt to deal with culture, conduct and, in some, apparent contempt for customers has lacked one key element: accountability. Using the discount to emphasise this element of accountability is one of the compelling parts of this proposal.
We on this side do not agree with the argument that the FCA is not up to the job; nor do I believe that it has not used its powers or that its procedures are flawed. The noble Lord, Lord Sharkey, has found a very important gap, which needs to be plugged: there is an incentive that does not work because there has been no downside. Even the FCA has moved towards the senior management regime to support the noble Lord’s central argument.
I, too, am grateful to the Minister for her openness and engagement and for the provision of officials—a quite copious amount of officials—to try to help address these sorts of matters. We have enjoyed those discussions and are looking forward to them continuing. Further openness on the cases where the discount has been applied would be extremely beneficial. As the FCA moves towards pursuing less significant fines, and has limited resources to both police and investigate, the approach of the noble Lord, Lord Sharkey, is helpful in ensuring compliance, and places a sensible responsibility on the financial sector. It can mean that we can feel confident—and I hope that I am not tempting fate—that when the most egregious fines and compensation sums are probably now behind us, the lower aggregate level of cost does not allow us to believe that the industry is properly policed. Only the accountability and responsibility in this amendment will do so.