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By Huw Jones
LONDON, Sept 23 (Reuters) - Regulators from the UnitedStates and elsewhere should coordinate better how they levyfines on banks for misconduct to avoid making it harder torebuild strength in the banking system, Bank of England DeputyGovernor Andrew Bailey said.
Bailey said at a British Bankers' Association on Tuesdaythat better discussion was needed among regulators to ensure bigfines don't get in the way of banks building up their capitalbuffers.
"I am trying to build capital in firms and it's draining outthe other side (in fines and penalties)," Bailey said.
The "major message" is that a collegial approach is requiredto assessing and implementing penalties so that prudentialregulators are involved to assess the consequences of suchpenalties, Bailey said.
"That discussion has to be had and currently is not beingsufficiently had," Bailey said.
He called for a "cards on the table" approach amonginternational regulators to come up with sensible penalties formisconduct.
"We must build trust among the authorities and regulatorsinvolved that that coordination will happen," Bailey added.
Bailey said putting restrictions on a bank's business couldalso be dangerous to its health and needed to be consideredcarefully.
European supervisors have voiced concerns that U.S.regulators fined French bank BNP Paribas almost $9billion to resolve accusations it violated U.S. sanctionsagainst Sudan, Cuba and Iran. The regulators also banned BNP fora year from conducting certain U.S. dollar transactions, acritical part of the bank's global business.
The bill for misconduct is also rising in Britain.
Three British banks, Barclays, Lloyds andRoyal Bank of Scotland have been fined $1.4 billion intotal for attempted manipulation of the London Interbank OfferedRate or Libor, a widely used interest rate benchmark.
Britain's top five banks have paid out more than 4 billionpounds in fines in the last two years, and could face furtherhits from investigations into alleged rigging of currencymarkets and other probes.
UK banks have also set aside more than 22 billion pounds tocompensate customers for mis-sold loan insurance, making iteasily the industry's costliest scandal.
Bailey also warned that banks pulling back from lending tosome customers or countries can hurt economic growth in poorercountries.
"Clearly it can threaten economic growth and development inthe world in ways that can be highly disruptive to the broadergrowth of the world economy. That's a dilemma that needs to bebrought to the surface and resolved," he said. (Reporting by Huw Jones, editing by Steve Slater)
