Global bank regulators unveil plans for forex shake-up following latest rigging scandal

Since forex fixing allegations emerged in January 2013, more than 30 banks are reportedly under investigation by a dozen regulators

The Financial Stability Board, chaired by Bank of England Governor Mark Carney, found that the two main currency fixes - London’s 4pm and Frankfurt’s 2.30pm - were open to abuse (GETTY IMAGES)

Global bank regulators today announced plans to massively shake-up the way foreign exchange benchmarks are set, following the latest rigging scandal to hit financial markets.

The Financial Stability Board, chaired by Bank of England Governor Mark Carney, found that the two main currency fixes — London’s 4pm and Frankfurt’s 2.30pm — were open to abuse.

It said the concentration of forex trading around the fixes “can create an opportunity and an incentive for dealers to try to influence the exchange rate — allegedly including by collusion or otherwise inappropriate sharing of information — to try to ensure that the market price at the fix generates a rate which ensures a profit from the fix trading”.

Tuesday's report focuses on the need for banks to increase their own controls to ensure they deal forex around the fixes clearly on their clients’ and not their own behalf.

Since forex fixing allegations emerged in January 2013, more than 30 banks are reportedly under investigation by a dozen regulators, and more than 20 individual traders have been suspended.

No fines have yet been imposed on banks for forex rigging, but experts believe that when they do come they could be even bigger than those levied for manipulating the Libor interest rate benchmark.

The Basel-based Financial Stability Board announced 15 draft recommendations for changing how exchange rates should be fixed.

Key proposals include widening the window of the fix from its current 60 seconds; seeking alternative measures such as a volume-weighted value calculated over 24 hours; moving the fix away from the centre point (on the hour or half hour); an independent global facility for matching orders; and more rigorous controls in banks.

Responses to Tuesday's plans must be submitted by 12 August.