Huge fines and revelations about some bankers’ bad behaviour in years gone by is obscuring recent progress made in cleaning up the industry, Bank of England deputy governor Minouche Shafik said last night.
Shafik has launched a nine-month review into fixed income, currency and commodities markets, looking at every aspect from the way securities are priced and the bespoke nature of some products, through to the structure of the market, the number of competing firms and how bankers are rewarded.
Known as the fair and efficient markets review, it is seeking input from market participants, banks’ clients, international regulators, and the wider public.
The deputy governor said she hopes it will lead to a range of proposals to restore trust and integrity to markets.
“We are slowly emerging from the worst economic crisis in living memory. Much has been done to strengthen the financial system since then,” Shafik told an audience at the London School of Economics.
“But some of the benefits of these advances are being offset by a long tail of outrageous conduct cases. These are like salt rubbed into the wounds to public confidence in financial markets.”
Meanwhile Shafik said separately that the Bank will need to see more signs of price pressures building in Britain’s economy before it raises interest rates from record low levels.
“We would need to see more of the data pointing in the same direction in terms of price pressures – particularly in terms of wages and unit labor costs,” Shafik told the Financial Times.
“In terms of sustained domestic inflationary pressures, that’s going to be the ultimate test.”