Report sees progress following UK market review but job ‘far from done’

"Significant progress" has been made in taking forward recommendations from the Bank of England's Fair and Effective Markets Review – but the "job is far from done", a report has found.

Published today (July 28), the report reviews the implementation of the BoE's recommendations for the fixed income, currency and commodities (Ficc) markets in the UK.

It noted "encouragingly" that action was taking place within firms to "help restore trust" in the wake of a number of high-profile abuses in both the UK and global financial markets.

A foreword by Charles Roxburgh of the HM Treasury, the BoE's Minouche Shafik and the Financial Conduct Authority's (FCA) Andrew Bailey, emphasised the need for firms to continue taking responsibility.

"Firms are responsible for creating both individually and collectively, cultures that place integrity, professionalism and high ethical standards at their core to ensure that behaviours are not limited to complying with the letter of regulations or laws," they said. The report was authored by staff from the three institutions.

Despite progress, there "remains a lack of trust" in financial markets and financial institutions due to past misconduct, the report said. Market participants must now "see through the changes in the market practices and behaviours that are necessary to restore the reputation of the industry".

The report praised the progress made with regard to raising standards, professionalism and accountability of individuals. Supported by the Senior Managers and Certification Regime (SM&CR) that entered into force for certain institutions in March 2016, the FCA and Prudential Regulation Authority are in the process of publishing a final tranche of rules with regard to the "recycling" of individuals with poor conduct records.

The report noted changes to the Bank of England and Financial Services Act, which included provisions for extending the SM&CR to all authorised firms, were expected to apply from 2018.

Progress has also been made with regard to improving the quality, clarity and market-wide understanding of Ficc trading practices – a Ficc markets and standards board (FMSB) was successfully established with 36 firms represented. Since then, the FMSB has produced and published transparency draft standards, and is the process of establishing a framework for adherence.

The work on the creation of a global FX code is also under way, with a complete code on track for publication in May 2017. So far, the working group has produced as statement on how adherence will be promoted alongside multiple sections of the code. They were published May 2016.

Recommendations to update the UK's criminal sanctions framework for market abuse and to extend the maximum sentence for criminal market abuse, however, have been put on hold due to the outcome of the UK's vote to leave the European Union.

The report noted the UK's domestic market abuse regime has "close links" to European legislation. As a result, the implementation of the recommendations will be reviewed in the context of the development of the UK's "new relationship" with the EU. The bank was keen to stress their importance was "not diminished".