Banks are ‘too big to prosecute’, says FSA’s Andrew Bailey

The largest banks have become too big to prosecute because of the impact criminal charges would have on confidence in them, Britain’s most senior bank regulator has admitted.

In a variant of the “too big to fail” problem, Andrew Bailey, chief executive designate of the Prudential Regulation Authority, said bringing a legal action against a major financial institution raised “very difficult questions”, reports The Telegraph.

Mr Bailey told The Daily Telegraph that some banks had grown too large to prosecute. “It would be a very destabilising issue. It’s another version of too important to fail,” he said,

“Because of the confidence issue with banks, a major criminal indictment, which we haven’t seen and I’m not saying we are going to see… this is not an ordinary criminal indictment,” he said.

His comments come days after HSBC’s record $1.9bn (£1.2bn) settlement with the US authorities over money-laundering linked to drug-trafficking. US assistant attorney general Lanny Breuer said of the decision not to prosecute: “In this day and age we have to evaluate that innocent people will face very big consequences if you make a decision.

Swiss bank UBS is also reported to be close to paying $1bn to settle British and US investigations into claims it attempted to rig key interbank lending rates.

A recent spate of settlements have raised concerns banks are effectively buying immunity from past misdeeds.

“If you get caught with your hand in the till you go to jail, but if you’re a big bank and you’re caught breaking the law it seems that all that happens is you’re fined and told you’ll go to jail if you do it again,” said Rosie Sharpe, at campaign group Global Witness.

Barclays is the only bank, so far, to have admitted its involvement in attempts to rig key Libor rates.

This week, three former traders were arrested by British police in connection with a Serious Fraud Office investigation into rate-rigging. None of the men have been charged. Royal Bank of Scotland is expected to reach a settlement over Libor allegations within the next couple of months.

On Thursday, George Osborne dismissed the idea of breaking up RBS, saying he was “not sure the gains outweigh the disruption”.