View from City Road: Wrongdoers should be hit in the pocket

Goldman Sachs' fine is little more than a foreign exchange dealer's annual bonus. It will barely dent the partners' profits and will not make the smallest impression on the cash pile they hope to get their hands on when they retire.

If a fine is to have the desired effect it must make a financial as well as a public relations impact. Money is the language City firms understand best. Only the pounds 750,000 fine imposed by Imro on Invesco MIM even started to get the message across.

City firms protest that the damage to their reputation is what matters. The shame felt by Guardian Royal Exchange, Scottish Widows and Norwich Union - all fined by Lautro - was more effective than any fine in getting them to change their ways, or so the theory goes.

But City memories are short. Consider the way in which Morgan Grenfell, National Westminster and UBS have recovered their standing in the wake of their involvements in the Guinness and Blue Arrow affairs. It has not taken long, even though all three were hauled over the coals in public. Some firms have even won government business.

The same cannot be said of individuals. Many of those who were caught up in the Guinness or Blue Arrow scandals are no longer able to work in the City. With this in mind, it is a pity that the Securities and Futures Authority did not identify the people responsible for Goldman's misdemeanours.

Goldman may find the going difficult for a long time yet - while the Maxwell affair stays in the headlines. The same may well turn out to be true of other firms involved. But the long-term outlook for any City firm caught up in a scandal is far from terminal unless it is hit where it hurts, which is in the pocket.

Raising fines would do wonders to the cost of City regulation. The proceeds could be used to reduce levies and even fund compensation to those who lose out from wrongdoing.