The Bank of England (BoE) today unveiled a set of tough new market rules which will increase individual responsibility among banks' senior managers and lengthen jail sentences for market abuse.
Recommendations from The Fair and Effective Markets Review include extending the senior managers regime – under which top execs can be held criminally liable for bad decisions and neglecting their duties – to more businesses such as inter-dealer brokers and buy-side asset managers.
Potential jail terms for market abuse will increase from seven years to 10 years – in line with those for fraud.
The central bank also said it's creating a new statutory civil and criminal market abuse regime for spot foreign exchange – drawing on the international work on a global code.
There will also be a fixed income, commodities and currencies Market Standards Board "to address areas of uncertainty in trading practices and promote adherence to standards".
And finance employees changing jobs will need a reference from their previous employer, helping ensure those who fail to play fair cannot evade detection.
"All the main building blocks are now in place for the real markets we need," BoE governor Mark Carney said.
The review was first announced last June to "help … restore trust in those markets in the wake of a number of recent high profile abuses".
It came after revelations traders at a number of banks had colluded to manipulate foreign exchange markets – as well as previous libor rate rigging allegations.
"The public rightly asks why it is that after so many scandals, and such cost to the country, so few individuals have faced punishment in the courts," the chancellor will say at his Mansion House speech later today.
"The governor and I agree: individuals who fraudulently manipulate markets and commit financial crime should be treated like the criminals they are – and they will be."
"For let us be clear: there is no trade-off between high standards of conduct and competitiveness. Far from it. Implementing the reforms set out in this review will ensure trust in our markets and strengthen London’s global leadership position."
Although businesses welcomed the move, they also cautioned that the UK's competitiveness as a financial centre must not be affected.