UK authorities intend to introduce criminal liability for manipulation on the foreign exchange market
UK authorities intend to introduce criminal liability for manipulation on the foreign exchange market, as well as in commodity and bond markets. This was announced on Wednesday evening by the British Finance Minister George Osborne.
However, he said that the UK does not intend to introduce criminal sanctions for market manipulation developed in the EU. Instead, according to Osborne, the British authorities will develop their own standards, which will be more responsive to the needs of the City of London - the largest financial center in Europe.
Osborne will present more detailed plan to introduce new measures during his speech at the banquet, which will be given on Thursday evening by the Lord Mayor of the City in his residence Mansion House. The Ministry of Finance has distributed part of his speech and excerpts from it in advance.
"City's reputation is of great importance to the UK economy” - said Osborne in his speech. “Markets located here determine interest rates on mortgages for ordinary people, exchange rates affect our exports and holidays, the price of commodities that we buy. I intend to take action against any abuse, stop unacceptable behavior of some people that prevail the equity in the markets for many people who depend on them," he added.
In 2008, a scandal erupted when it became known that employees of several major British banks have committed fraud in determining the London interbank lending rates LIBOR. It serves as an international benchmark for determining interest rates on financial products in the amount of 350 trillion dollars, such as mortgages.
LIBOR is defined as the average amount of interest for which the leading London banks borrow in the interbank market.
It turned out that during the global financial crisis of 2008, some banks deliberately understated or overstated their bid to profit from transactions or artificially enhanced the experience of their creditworthiness. Investigation conducted by the financial regulatory authorities, showed that such manipulation occurred since 1991.
According to the results of the investigation, many banks have been fined of a total several billion pounds. LIBOR manipulating is part of the UK criminal offense with a maximum penalty of seven years in prison. Recently, there were reports in the press that the manipulation, such as those committed with LIBOR, also occurred in the London foreign exchange market. The volume of this market on a global scale is 5 trillion dollars a day. Therefore, reference exchange rates are determined in London every day and used for the valuation of assets of investment funds.
British officials beware that the introduction of the developed EU penalties for market manipulation can make the banks, operating in the City, move their business to other financial centers, therefore London intends to establish its own rules. A committee, established by the Ministry of Finance, the Bank of England and the Financial Supervisory Authorities would form it. These measures will be announced next year.