Severer punishments and stronger initiatives to tackle malpractice in finance sector will be officially instigated in the near future, Chancellor of the Exchequer George Osborne has identified.
Public apathy toward City officials and the financial sector in the UK has grown hugely in the aftermath of the global economic downturn which gripped the nation back in 2008, and ministers have been under huge scrutiny to implement measures that check the conduct of financial institutions and ensure they uphold a consumer orientated code of ethics.
In particular, the multi-million pound bailout of Lloyds and RBS and the Libor interest rate-fixing scandal have raised the pressure on the government to introduce legislation to prevent such occurrences happening again, with the Chancellor signalling his intent to adhere to public opinion and tackle the problems head on.
Mr Osborne has said that he will endeavour to make the manipulation of foreign currency markets by banking organisations a criminal offence, and will aim to bring an end to the “the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them”.
The move will seek to address growing concerns about whether the foreign exchange market has been rigged in the past, with Osborne also highlighting that he will seek to introduce legislation into the commodity and fixed income markets in order to ensure that ëintegrityí is upheld in the City.
ëI will deal with abusesí
Mr Osborne also announced that the Treasury, the Financial Conduct Authority and the Bank of England will all work collaboratively in order to evaluate the manner in which the markets operate.
Mr Osborne said: “The integrity of the City matters to the economy of Britain.
“Markets here set the interest rates for people’s mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy. I am going to deal with abuses.”
The Chancellorís identification of his intention to clamp down on malpractice within the finance industry is the latest chapter in a rapidly growing initiative to bring the conduct of City officials into check.
The Financial Conduct Authority has already begun to crank up their investigations into the conduct of finance officials, whilst the latest Parliamentary Commission on Banking Standards has contributed toward the implementation of a new legal regime for executives.
However, apprehension remains about the practice of officials in the forex markets, where traders have been enabled to govern and check themselves.
BBC business editor Kamal Ahmed said: “A new set of storm clouds are gathering over UK banks. The foreign exchange market is under investigation. The allegation is fraud.”
He said: “Companies that operate around the world use the foreign exchange market to buy and sell currencies so that they can trade in different countries.
“Our pension funds also use the market so they can invest globally. If wrongdoing is proved, banks could be facing fines.
“The chancellor will say that any manipulation could effect the amount people pay for foreign currencies when they go abroad, as well as the amount companies pay.”
It is currently believed that as many as 15 banks across the globe are currently under investigation by their presiding regulators for allegedly manipulating forex markets, with the FCA chief, Martin Wheatley, arguing that if proven true that the crimes would be ìevery bit as bad as Liborî.
The Libor Scandal caused a huge public uproar, with the revelation that banks were fixing the interest rates on finance which they lent amongst themselves. It is estimated that banks across the globe have already been fined over £6 billion collectively, with more expected to be paid in the future.
And Chancellor Osborne has pledged to push forward with the collaborative review of all major finance markets in order to ensure that they act ëfairlyí and in the interest of consumers.
However, Labour’s shadow Treasury Minister Cathy Jamieson has argued that the Chancellorís actions are “too little, too late”.
She said: “We pressed ministers to regulate commodities markets and the full array of financial benchmarks back in 2012, but the chancellor failed to act.”
The Confederation of British Industry (CBI) have praised the Chancellor for sending a ëstrong signalí out to financial institutions that malpractice will no longer be tolerated, but argued that ëmore is needed to be doneí in order to ensure that this ideal manifests in reality and changes the overall character of officials in the financial sector.
John Cridland, CBI Director-General, said: ìRebuilding trust in banking is critical to underpinning the economic recovery and to the UKís long-term growth, so it makes sense for the regulatory focus to be firmly on conduct.
ìWe need to send out a strong signal against wrongdoing and beefing up regulatorsí tools to combat market abuse will help to do this.
ìAt the same time, we need to look more broadly, at instilling a culture in the banking industry that always put customers first ñ achieving this will require strong leadership from the top of each and every organisation.
Whilst all the remarks of politicians during an election year will be made with a populist sentiment, their does appear to an air of sincerity in Mr Osborneís remarks, and it if somewhat refreshing to see the major financial policymakers and upholders in the country working collaboratively to tackle a real issue in society at present; the broken link and trust between consumers and financial institutions. Whilst nothing is for certain at present, the collective investigations could go a long way to ensuring that trust is re-established between these two groups; a utopian reality that could manifest if consumers keep putting pressure on and continue to break free of the exploitation shackles placed on them by financial powers that characterised the 80ís, 90ís and 00ís.