The Bank of England has launched a new code of integrity for all British participants in the money markets.
The code’s guidelines will only be voluntary for traders in markets for deposits, repos and securities lending, so will not be legally binding.
The UK Money Markets Code aims to “promote integrity and effective functioning” by encouraging the uptake of best practice in for traders in capital markets for shorter-term debt, the Bank said.
The Bank wants to move the UK’s regulatory culture away from a regime based on punishing offenders and more towards individual responsibility – in part to try to limit the need for the Bank itself to step in.
The code was drawn up by the Bank with the aid of industry veterans.
The Bank is also trying to promote the new FX global code for foreign exchange trading, which has remained one of the least regulated markets despite its massive size, and the precious metals code for those trading in London’s bullion markets.
The new codes supersede the Non-Investment Products (Nips) Code, which covered a broader array of markets.
After the global financial crisis regulators around the world under heavy political pressure embarked on a series of attempts, with limited success, to punish market participants who had engaged in risky behaviour.
The code’s launch follows a speech by Bank of England governor Mark Carney who said he wanted to move away from a reliance on fines to enforce good conduct.
Carney said: "Authorities cannot and should not try to legislate for every circumstance, watch every transaction, or anticipate every market innovation. So while fines and sanctions have roles in deterring misconduct, they will not, on their own, bring about the cultural change we need."
In a foreword to the new code Chris Salmon, the Bank’s executive director for markets, said: “The high standards it promotes will build greater trust and certainty throughout these markets, bringing clear benefits for all involved.”