HM Treasury, the BoE and the Financial Conduct Authority announce Fair and Effective Markets Review 

The British government has announced in a press release publishing the Fair and Effective Markets Review the strategic steps to follow in order to raise standards of conduct in the financial system.

The review was conducted jointly by the Treasury, the Bank of England and the Financial Conduct Authority (FCA) informing investors into the way wholesale financial markets operate. They underscored that strong and successful financial services that set the highest standards are an essential part of building a resilient economy.

Recent events have demonstrated the need for authorities and market participants to take action to ensure fair and effective markets. Forward-looking in nature, this Review reflects the government’s long term economic plan to ensure Britain remains a world leader in financial services, with successful institutions operating to the highest standards.

Drawing on the insights of public officials, market participants, end users of wholesale financial services, the Review is also intended to reinforce confidence in the fairness and effectiveness of UK wholesale financial market activity, and influence the international debate on trading practices.

Amidst recent serious allegations of misconduct in financial markets, the Review will focus on those wholesale markets where the bulk of concerns about misconduct have arisen – fixed income, currency and commodity markets – although it could have applicability across a wider range of wholesale markets.

It builds upon the tough action Britain has already taken to punish the wrongdoers and fix the financial system, including the work of the FCA to reform LIBOR and the Parliamentary Commission on Banking Standards which has led to a new legal regime for senior managers.

The Review will run for 12 months and is expected to make recommendations on:

• principles to govern the operation of fair and effective financial markets;
• reforms to ensure standards of behaviour are in accordance with those principles;
• tools to strengthen the oversight of market conduct;
• whether the regulatory perimeter for wholesale financial markets should be extended, and to what extent international action is required; and
• additional reforms in relation to benchmarks, in order to strengthen market infrastructure.

In the meantime, the government will take action domestically including:

• extending the new legislation the government put in place to regulate LIBOR to cover further benchmarks in the foreign exchange, fixed income and commodity markets, based on an early recommendation of the Review – this legislation includes new criminal sanctions;
• extending the Senior Managers and Certification Regime to cover all banks that have a presence in this country, by bringing in foreign banks that have branches here; and
• expanding the tough UK criminal regime for market abuse. As part of this, the UK will not opt in to EU rules. Our own rules will be as strong or stronger than those of the EU, but will preserve flexibility to reflect specific circumstances in the UK’s globally important financial sector.

The government will consult on these steps in the Autumn.

 

Source: BoE

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