This week some British charities have an unexpected reason to smile. On Wednesday, European and American regulators imposed fines of $4.3bn on six large banks for rigging foreign exchange markets. In the past, the British government has directed some of the money raised from so-called “misdemeanour fines” to worthy causes such as a physical rehabilitation programme for soldiers; it will probably do the same this time. As George Osborne, the UK chancellor, put it: “We’re using the money raised from fines on those who demonstrated the very worst of values in our society to support those who demonstrate the very best.”
Yet this type of initiative is the exception, not the rule. The fines now being imposed by western regulators are dramatically higher than anything seen before, but much of the money is not being used in a transparent way. That flies in the face of politicians’ demands for finance to become more open. It also risks undermining the search for a sense of justice – and closure.
“It’s very hard to see what is really going on,” observes Roger McCormick, a London-based economist who has been tracking the recent bank penalties. Charles Calomiris, a finance professor at Columbia Business School agrees: “The situation is strange – its incredibly hard to get much data at all.”