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Penalise 'bad apple' traders, suggests Bank of England Penalise 'bad apple' traders, suggests Bank of England
(about 4 hours later)
More could be done to punish traders who try to manipulate financial markets, the deputy governor of the Bank of England has said. More should be done to punish traders who try to manipulate financial markets, the deputy governor of the Bank of England has said.
Announcing the terms of the Bank's consultation into rebuilding trust in financial markets, Minouche Shafik said it should consider stronger penalties for what she called "bad apples". Minouche Shafik said the Bank's consultation into rebuilding trust in financial markets, should consider stronger penalties for what she called "bad apples".
Its review will focus on fixed income, currency and commodity markets. Ms Shafik made the suggestion during her first speech as deputy governor.
The speech marks Ms Shafik's first as deputy governor. The Bank's review will focus on fixed income, currency and commodity markets.
The review follows the Libor scandal which saw banks fined £4bn for manipulating the inter-bank lending - or Libor - rate, which they did to boost profits. The nine-month consultation by the Bank comes in the wake of the Libor scandal which saw banks fined £4bn for manipulating the inter-bank lending - or Libor - rate, which they did to boost profits.
Chancellor George Osborne, ordered the inquiry - called Making Markets Fair and Effective - to try and restore the reputation of other UK-based financial markets. The inquiry - called Making Markets Fair and Effective - was ordered by chancellor George Osborne, who said he wanted to restore the reputation of other UK-based financial markets.
"The integrity of the City matters to Britain. Markets here set the interest rate for people's mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy," he added.
'Misconduct''Misconduct'
Speaking at the London School of Economics (LSE), Ms Shafik warned that there could easily be a repeat of the Libor scandal.Speaking at the London School of Economics (LSE), Ms Shafik warned that there could easily be a repeat of the Libor scandal.
"The risk is that, as memories of recent enforcement cases fade, bad practices may re-emerge," she said."The risk is that, as memories of recent enforcement cases fade, bad practices may re-emerge," she said.
"Some say that may already be happening," she added."Some say that may already be happening," she added.
And she suggested that the review - which she is heading - should think about increasing sanctions against individuals.And she suggested that the review - which she is heading - should think about increasing sanctions against individuals.
"The review also wants to consider whether more needs to be done to monitor for, and where it is found, punish misconduct," she said."The review also wants to consider whether more needs to be done to monitor for, and where it is found, punish misconduct," she said.
Any changes would be in addition to new laws brought in by the government, which already penalise senior bank managers if their conduct leads to a bank's failure. Any changes as a result of the review would come on top of new laws already brought in by the government.
Under the Financial Services Act of 2013, such managers can be sent to prison. Under these new laws, senior bank managers could be sent to prison if their conduct leads to the failure of a bank.
TransparencyTransparency
Alongside the Bank of England, the review is being run by the Financial Conduct Authority (FCA) and the Treasury. The Financial Conduct Authority (FCA) and the Treasury are working on the review with the Bank of England.
It suggests major reforms to fixed income markets, as well as foreign exchange and commodity trading.
Such markets are vital to the reputation of London as a financial centre. 70% of trading in international bonds take place in London, for example.
Among its recommendations, the review suggestsAmong its recommendations, the review suggests
BenchmarksBenchmarks
The Bank has already singled out seven benchmarks, which it also believes should be reformed. These are used for the trading of everything from interest rate swaps to foreign exchange, and from gold to oil. The Bank has already singled out seven benchmarks, which it believes should be reformed. These are used for the trading of everything from interest rate swaps to foreign exchange, and from gold to oil.
The benchmarks affect millions of people, by determining the price of shopping, or the cost of filling up at the pumps. The benchmarks affect millions of people, by determining the price of shopping, or the cost of filling up at the pumps, for example.
The FCA is already part-way through an enquiry into the manipulation of foreign exchange markets, known as Forex.
When it launched the enquiry, just over a year ago, it said it would be some time before it decided whether there had been any misconduct. Nevertheless it is thought that talks have been taking place between the FCA and six banks, over possible fines.
The fines could be announced as soon as next month.
The Bank of England proposals will now go out for consultation, before a final report in the summer of 2015.The Bank of England proposals will now go out for consultation, before a final report in the summer of 2015.