Money from fines imposed on banks that had rigged interest rates has been paid to military causes, the chancellor announced in his Budget today.
George Osborne said: "Further awards from the Libor
[London inter-bank offered rates] banking fines have gone to good military causes, with money for Combat Stress to help veterans with mental health issues and funds for Christmas boxes for all our troops on operations this year and next.
"Those who have paid fines in our financial sector because they demonstrated the very worst values are paying to support those in our armed forces who demonstrate the very best of British values."
Osborne announced in February that three military charities would share £1.3 million from Libor fines. The three charities support injured soldiers, provide tickets to events and pay for holidays for bomb disposal teams.
Beyond his brief comment in today's Budget speech, the Treasury did not reveal any further information about how the money was spent or how much money had been paid in total to military causes.
However, the Budget 2013 document shows that £300 million of income from Libor fines has been received by the Treasury; but it was not included in some of its calculations as it was not included in Budget 2012 totals.
Fines collected by the Financial Services Authority are normally kept by the authority and used to lower the membership fees that financial services pay to the City watchdog. Osborne previously announced that money from Libor fines would be diverted to good causes though.
However, on 1 April all fines will be directed into the Treasury's coffers. The change, which is part of the Financial Services Bill, will apply retrospectively to all fines that the FSA
has levied since 1 April 2012.
Penalties imposed from April to December 2012 totalled more than £287 million. The largest fine in that period was paid by UBS – a massive £160 million – for its misconduct over Libor and the euro rate.
The London Inter-Bank Offer Rate is the rate at which banks lend to each other over the short term from overnight to five years. The LIBOR market enables banks to cover temporary shortages of capital by borrowing from banks with surpluses and vice versa and reduces the need for each bank to hold large quantities of liquid assets (cash), enabling it to release funds for more profitable lending. LIBOR rates are used to determine interest rates on many types of loan and credit products such as credit cards, adjustable rate mortgages and business loans.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.