UK Finance Industry: Sackings and Suspensions Rise 75%

Sackings and suspensions in the UK financial industry have jumped to their highest level in five years, following a succession of scandals which have rocked the sector.

According to figures from a Freedom of Information Act request cited by law firm Pinsent Masons, 1,373 individuals working in the UK financial services industry were dismissed or suspended in 2012, representing a 76 percent increase in in these areas compared to 2011.

Pinsent Masons says that changes to the employment status of individuals who require FSA authorisation to carry out their function must be registered with the regulator and those FSA-regulated businesses are also expected to indicate where employees have been sacked or suspended, most commonly as a result of suspected wrongdoing.

The law firm added that the overall number of financial service sector job losses has reached its highest level since 2008, with 36,868 people being fired or made redundant last year.

The Financial Services Authority has cracked down on a number of individuals and firms of different sizes over the last year, for market abuse, mis-selling and insider trading, and put more pressure on institutions to hold individual employees accountable.

"The FSA has increasingly shown that it is cracking down on financial crime and market abuse. Financial services firms are operating under increased scrutiny and as a result employers are imposing industry rules more strictly. FSA enforcement activity has clearly had an impact on firms' willingness to tolerate wrongdoing. Firms now appear much more likely to discipline employees for offences," said Helen Farr, partner in the financial services team at Pinsent Masons.

Over the last year, the industry has been engulfed in a spate of scandals including 'rogue trading', mis-selling of financial products and the manipulation of Libor.

The most high-profile case includes the prosecution of former UBS trader Kweku Adoboli for the biggest fraud in British history, which cost the Swiss bank $2.3bn (€1.7bn, £1.4bn) and Adoboli seven years in prison.

Today, Lloyds Banking Group confirmed it had fired a 'rogue trader' last year, after it uncovered a scheme designed to inflate the executive's bonus.

"It is Group policy that we will not comment in relation to named individual employees, regardless of whether they are current or former employees, nor will we confirm the reasons behind their departure from the Group. [However] We can confirm that an individual was dismissed in February 2012 from the Group following an investigation. This investigation was prompted by our own internal procedures which picked up certain irregularities that conflicted with our own policies and procedures. We notified the FSA of the findings at the time. At issue were incorrect valuations of a small number of trades. These incorrect valuations were not significant in nature," says a Lloyds spokesperson to IBTimes UK.

"As with all trading positions, performance is subject to market developments. Trading in this area, which began in 2008, ceased in 2011 as it did not match the Group's strategy of focusing on the UK. The position generated positive results in 2009 and 2010 and negative results in 2011 and 2012, with both 2008 and 2013 to date being flat. Across the period as a whole, the net outcome is a negative result in the low, single-digit millions of pounds," the spokesperson adds.

Meanwhile, the fallout from the Libor fixing scandal led to a number of individuals being sacked or suspended from banks such as Barclays, UBS, RBS and Lloyds.

In the recent Parliamentary Commission on Banking Standards hearings, UBS executives revealed that 18 people were sacked for their part in the manipulation of global interbanking lending rates, while RBS fired a number of senior traders linked to the same scandal.

Former and current FSA heavyweights also said to the PCBS that while the regulator had tried to come down hard on institutions and individuals for market abuse and other misdemeanours, there is only so much power the FSA can wield.

"The FSA has been seeking to hold senior executives accountable [for issues such as Libor fixing] but but this has become more and more difficult. The Serious Fraud Office is investigating the Libor matter [in a criminal probe] and ultimately who takes action over an individual depends on the evidence found," said Hector Sants, ex-CEO of the FSA to the PCBS.

"The mandate given to FSA to take action against individuals is difficult, so one thing to improve is the focus on individual accountability," he added.