LONDON (Reuters) - An international settlement over allegations of manipulation in the foreign exchange market shows reform of Britain's banking system is still badly needed and must not be diluted, a group of British lawmakers said on Monday.
Regulators last week imposed fines totaling $4.3 billion on HSBC Holdings Plc, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co, Citigroup Inc, UBS AG and Bank of America Corp, for failing to stop traders from trying to manipulate the forex market, following a year-long global investigation.
Last year Britain's Parliamentary Commission on Banking Standards (PCBS), set up to look at improving behavior at banks in the wake of scandals including the rigging of interest rate benchmarks such as Libor, recommended a range of reforms.
"These reforms are badly needed to tackle serious lapses in banking standards and a collapse of trust in the industry. The forex scandal has exposed how much work there is still to do," lawmaker Andrew Tyrie, who led the PCBS, said.
Tyrie said the fact that the forex market appeared to have been similarly exposed to rigging several years after Libor was "extremely concerning" and banks and regulators needed to make sure the reforms were being put in place.
"They need to be fully implemented. They certainly must not be diluted," he said.
Publishing a progress report, Tyrie and other members of the PCBS warned regulators that the ringfencing of retail banking from investment activities was one area at risk of being diluted by bank lobbying.
"Any attempts to 'game' the rules once in place should be met with strong action by the regulators," said Tyrie.
The commissioners said that in order to better align rewards for bankers with the timescale of the risks involved in their trades, bonus payments should be deferred for longer than the five to seven years proposed by the regulator.
They also criticized the implementation of a scheme requiring staff who could pose the biggest risk of harm to a bank or its customers to be certified and monitored, saying banks themselves rather than the regulator should take primary responsibility for identifying such staff.
Sources have told Reuters bank executives and regulators could be grilled by parliament's Treasury Select Committee, a cross-party group also headed by Tyrie, over whether fines have done anything to change bank behavior.
Editing by David Holmes