The FSA is cracking down on dishonesty in the banking sector.

Two former chiefs of Northern Rock have been fined a combined £644,000 by the Financial Services Authority (FSA) and have been banned from working in financial services.

David Baker, former Deputy Chief Executive of the troubled bank, has been fined £504,000 for misreporting mortgage arrears figures in 2007. According to the FSA, Baker was made aware of a significant number of loans which had been omitted from the banks’ mortgage arrears figures. Despite his knowledge he failed to escalate the issue internally.

As Credit Director of the Debt Management Unit (DMU) at Northern Rock, Richard Barclay was responsible for providing management information regarding loan arrears and property possessions. The FSA says that Barclay has been found guilty of misreporting the firm’s arrears position, despite being privy to the information early on.

Early cooperation from both men resulted in a 30% reduction of their fine, with Barclay’s fine further reduced “on the grounds of hardship”. However, both have been banned from working at a high level at another bank.

Margaret Cole, FSA Director of Enforcement and Financial Crime, commented on the case: “Baker and Barclay both failed to meet the standards we require of senior individuals within FSA-regulated firms. They both held senior positions of trust within the firm but they provided inaccurate information to the Northern Rock board and to the market.”

The FSA says that its hard-lined approach to people who fail to act with integrity should send a clear message that it is not afraid to take action against these criminals when they step over the line.

It has recently imposed some record fines on individuals and companies which have acted dishonestly. Yesterday it announced a £1.225 million fine for Kensington Mortgage Company for “poor treatment of some customers facing mortgage arrears” between 1 January 2007 and 31 October 2008.