European bankers told to expect tougher regulation

Nearly four years after bank dealings in subprime mortgages caused a global financial crisis, the sector’s image is again in tatters due to an interest rate rigging scandal and massive losses from bad trades including at UBS and Societe Generale, reports Reuters.

Joerg Asmussen, a member of the European Central Bank’s executive board, said efforts within the G20 group of leading economies to address problems in the sector had lost momentum and he urged a new drive to clean up banking.

“The cumulation of misdeeds by individuals at big financial institutions shows that tougher regulations are needed,” he told an audience of bankers at a conference in Frankfurt. “Neither internal controls nor external oversight is working.”

Asmussen said that if allegations in the Libor interest rate rigging affair proved true, the consequences for the industry were “unforeseeable”.

Barclays was fined a record $450 million (283 million pounds) after it admitted manipulating its submissions used to calculate Libor. Regulators believe rigging went far beyond the Barclays and are investigating most of the world’s largest banks.

In Germany, which holds federal elections next year, all the major parties including Chancellor Angela Merkel’s Christian Democrats are preparing proposals to rein in banks.

Finance Minister Wolfgang Schaeuble said on Monday he was looking into expanding the options for taking legal action against bank managers.

He has also backed a European push to impose tighter curbs on bankers’ pay. Banks say the 27-nation EU already has the toughest pay limits in the world and new measures would put them at a disadvantage to their U.S. and Asian rivals.