In his Mansion House speech, Carney warned bankers that the age of irresponsibility is over. He suggested that unethical behaviour has gone unchecked, proliferated and eventually became the norm.
This was echoed by Virgin Money CEO Jayne-Anne Gadhia, who claimed winning at all costs has become a problem in the banking sector.
Also speaking at Mansion House, chancellor George Osborne implied that the public was right to ask why few individuals have faced punishment in court after so many scandals. He said: “Individuals who fraudulently manipulate markets and commit financial crime should be treated like the criminals they are – and they will be.”
Carney added that criminal sanctions should be updated, with market abuse rules extended and maximum prison terms lengthened.
The chancellor and the governor’s comments came as the Bank of England (BoE) released its “Fair and Effective Markets Review“, which looked into ways of strengthening controls in financial markets.
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The report recommended a crackdown on rogue traders, as well as a new market standards board. Furthermore, it said that criminal sanctions for market abuse should be extended to traders in markets such as foreign exchange. It also suggested that maximum sentences should be lengthened from seven years to ten.
The BoE has agreed to be covered by the new regime. Carney even criticised the bank for how it operated ahead of the financial crisis.
“In the run up to the crisis, the bank’s contribution to the effectiveness of markets fell short,” he said. “Once under pressure, the bank could not support the banking system. The bank neither identified the scale of risks in the system nor spotted gaps in the regulatory architecture.”
He claimed that the BoE’s arcane governance blurred the bank’s accountability and, by extension, weakened the social licence of markets.
City of London mayor Alan Yarrow explained that upholding professional standards should be the guide for financial workers. He suggested that what businesses believe is right should be the principle of the UK’s regulation.
He added that, much like in a supermarket with no security cameras, if someone takes something without paying, it is theft.
Referencing the “Fair and Effective Markets Review,” Yarrow claimed that by toughening up the rules for manipulating the fixed income, commodities and currency markets, Britain will be turning a corner and making further abuse less likely.
The combination of tougher rules with the expectation of better conduct and more professionalism is what the markets need and people want to see, he said.
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