16 June 2014
The government is to conduct a review of the financial services wholesale markets to raise standards of conduct.
The joint review by the Treasury, the Bank of England (BoE) and the Financial Conduct Authority (FCA) will aim to review and improve the way wholesale financial markets operate.
The ‘Fair and Effective Markets Review’ will be led by BoE Deputy Governor for Markets and Banking, Minouche Shafik; with Martin Wheatley, CEO of FCA; and Charles Roxburgh Director General, Financial Services, HM Treasury as co-chairs.
Amid 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.
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.
The Senior Managers and Certification Regime will be extended to cover all banks that have a presence in this country, by bringing in foreign banks that have branches here.
The tough UK criminal regime for market abuse will be expanded. As part of this, the UK will not opt in to EU rules. UK rules will be as strong as or stronger than those of the EU, but will preserve flexibility to reflect specific circumstances in the UK financial sector.