If you thought the £millions in fines the FSA imposes on naughty financiers goes to help their victims, you clearly haven't been paying attention to the fact that this is Ripped-Off Britain.
- The FSA is funded by fees levied on financial services companies.
- FSA fines go towards paying FSA costs.
- This reduces the amount of the fees paid by financials services companies.
"The industry's record fines this year will result in a huge discount on its annual levy to the Financial Services Authority (FSA)"
In the FSA's 2011-12 annual report, it is stated
"During 2011/12 we collected penalties of £70.7m (2010/11 £86.2m),
which will be used to reduce the fees levied by us across relevant fee blocks in future years."
i.e. reduces FSA fees paid by the financial services industry.
The FSA claims that the real penalty on firms is the compensation they have to pay their customers. For instance, victims are receiving 8% interest on the refunds they are getting for the banks' payment protection insurance (PPI) scam. 8% is way more than they could get keeping the money in a savings account.But think on this. Many of the people who had money swiped by the banks use credit cards and other high cost loans. The interest on these loans that they could have otherwise paid off is typically 20% or more. By having their money pinched by the banks, they will still make a significant overall loss even after getting 8% interest on the refunds.
And in the case of PPI, some estimates claim £4.5 billion of ripped-off money has been held by the banks over the years. That's £4.5 billion the banks were lending out at interest rates well in excess of 8%. Netting a further profit for the bankers.
As we have said before, fines are one of the most lucrative investments the banks can make.
If you really want to get your knickers in a twist find out about the FSA fine art and wine collection! While you are at it, take a gander at their pension scheme and maybe even investigate their hotel bills. It will make interesting reading.
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