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By Kylie MacLellan
LONDON, Nov 17 (Reuters) - An international settlement overallegations of manipulation in the foreign exchange market showsreform of Britain's banking system is still badly needed andmust not be diluted, a group of British lawmakers said onMonday.
Regulators last week imposed fines totalling $4.3 billion onHSBC Holdings Plc, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co, Citigroup Inc, UBSAG and Bank of America Corp, for failing tostop traders from trying to manipulate the forex market,following a year-long global investigation.
Last year Britain's Parliamentary Commission on BankingStandards (PCBS), set up to look at improving behaviour at banksin the wake of scandals including the rigging of interest ratebenchmarks such as Libor, recommended a range of reforms.
"These reforms are badly needed to tackle serious lapses inbanking standards and a collapse of trust in the industry. Theforex scandal has exposed how much work there is still to do,"lawmaker Andrew Tyrie, who led the PCBS, said.
Tyrie said the fact that the forex market appeared to havebeen similarly exposed to rigging several years after Libor was"extremely concerning" and banks and regulators needed to makesure the reforms were being put in place.
"They need to be fully implemented. They certainly must notbe diluted," he said.
Publishing a progress report, Tyrie and other members of thePCBS warned regulators that the ringfencing of retail bankingfrom investment activities was one area at risk of being dilutedby bank lobbying.
"Any attempts to 'game' the rules once in place should bemet with strong action by the regulators," said Tyrie.
The commissioners said that in order to better align rewardsfor bankers with the timescale of the risks involved in theirtrades, bonus payments should be deferred for longer than thefive to seven years proposed by the regulator.
They also criticised the implementation of a schemerequiring staff who could pose the biggest risk of harm to abank or its customers to be certified and monitored, sayingbanks themselves rather than the regulator should take primaryresponsibility for identifying such staff.
Sources have told Reuters bank executives and regulatorscould be grilled by parliament's Treasury Select Committee, across-party group also headed by Tyrie, over whether fines havedone anything to change bank behaviour. (Editing by David Holmes)
