Fears over 'extortionate" US fines on British firms After a brief respite in January, the DoJ and the CFTC last week slapped a $475m penalty on Royal Bank of Scotland for manipulating Libor. And this week, Barclays confirmed in its annual report that it is being investigated by the US authorities over its emergency fundraisings with Qatar during the financial crisis. No wonder, then, that in the City of London there are mounting concerns that American regulators have developed an appetite for imposing excessive fines on British companies. One leading fund manager described the size of the fines as "extortion." Richard Marwood, a fund manager at Axa Investments, said he is concerned that US regulators see large companies as piñatas (breakable containers of treats), easily bashed for cash. So, is there any weight to the accusation that American authorities are unfairly targeting foreign firms? John Coffee, a professor of securities law at Columbia University in New York, says that US regulators have historically imposed higher penalties than their counterparts in Britain. The CFTC and the DoJ both levied larger fines on Barclays and RBS over Libor than the UK's Financial Services Authority, for example. Concern about the penalties has also focused on the lack of transparency over how regulators determine their size. Rather than adhering to a particular method, legal experts say the amount is reached through a set of negotiations between the lawyers for the government and those representing the particular company. Companies operating in the US also risk falling victim to the political battles between the country's regulators. Some believe that fate befell Standard Chartered last August, when the Department of Financial Services (DFS), a little-known and newly established New York regulator, wiped more than £5bn from the bank's value in a single day after publicly accusing the lender of helping Iran illegally launder $250bn though America's financial system. Boris Johnson, the Mayor of London, said that the inflammatory language used in the attack was motivated by a desire to damage London's claim to be the world's financial capital. Standard Chartered paid the DFS $340m and, four months later, stumped up $327m to the Federal Reserve to settle the same allegations. Officials at the Fed were said to be concerned that the DFS was doing little more than grandstanding for political purposes. "You have turf wars between regulators and you have regulators with political agendas," said James Angel, of Georgetown University, an expert in regulation. Regulators do like to show off how good they are at getting scalps. A perception in the City that US regulators have UK companies in their crosshairs while American firms are treated more leniently has been fuelled by this particular sequence of settlements. The $3bn penalty imposed on GSK had as little to do with BP's fine as that punishment had with the Libor agreements, but they all came cascading down within six months of each other. But the prosecutor who has been leading the DoJ's investigation into the Libor scandal rejects accusations of bias. "We are absolutely not singling out British banks," said Lanny Breuer, the head of the DoJ's criminal division. It may well be the case that British banks got out in front of this. Several US banks, including Citgroup and JP Morgan, are still under investigation as part of the global Libor inquiry. The hard-hitting language used by American regulators when handing down the fines is not simply directed at foreign banks, insisted Bart Chilton, one of five commissioners at the CFTC. "When I talk tough about the need for a culture change, US banks are front and centre in that," he argued. Indeed, regulators have faced criticism in the US for not imposing tougher criminal sanctions over the Libor scandal. With the economic recovery fragile and the public still angry over the financial crisis, experts say the authorities will only get tougher. "What some may see as an anti-British bias, I see as a shift towards sterner enforcement in the US following the financial crisis," said Mr Coffee. Arguably the most significant action taken by the DoJ this month was the lawsuit it filed alleging a $5bn fraud against US credit rating agency Standard & Poor's for understating the risks of the bonds it rated in the run-up to the financial crisis. The debate will continue to rage between those who believe the penalties of the past eight months have been excessive and those who contend they are not hard enough. But one thing is certain - greater transparency from US regulators on how they arrive at the swingeing fines they impose is essential if they are to avoid the perception of partisanship.