The Financial Conduct Authority (FCA) is preparing to increase the size of penalties it imposes on financial firms, following a series of court rulings that forced the regulator to scale back fines in recent cases, according to people familiar with the matter.
The move signals a tougher enforcement stance from the UK’s top financial watchdog, which has faced criticism over its ability to hold companies accountable. The FCA has been reviewing its penalty framework after losing or reducing fines in several high-profile legal challenges, including cases involving benchmark manipulation and consumer lending practices.
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Court Rulings Force Penalty Reductions
In 2024, the Upper Tribunal reduced a fine against a major bank by more than 40%, ruling that the FCA had miscalculated the penalty. Similar rulings have emerged in other cases, where judges found that the regulator’s methodology for setting fines was disproportionate or lacked sufficient legal basis.
The FCA’s current penalty framework ties fines to a percentage of a firm’s revenue, but courts have pushed back against what they view as excessive or arbitrary calculations. The regulator is now exploring alternative methods, including a fixed-penalty approach for certain violations, to reduce the risk of future legal defeats.
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Industry Implications
Banks, asset managers, and fintech firms operating in the UK should expect higher fines for misconduct if the FCA’s revised framework is adopted. The regulator is also considering expanding its use of personal liability orders against senior executives, making it easier to hold individuals accountable.
Legal experts say the changes could lead to more contested cases in court. “The FCA is trying to regain credibility after several high-profile losses,” said Sarah Clarke, a regulatory lawyer at Clifford Chance. “But if they push for larger fines without solid legal foundations, they risk further judicial pushback.”
The FCA declined to comment on specific proposals, but a spokesperson said the regulator is “committed to ensuring our enforcement actions are effective, fair, and legally resilient.”
The development comes as the UK government reviews the FCA’s broader regulatory powers, with a consultation on financial services regulation expected later this year.
