The Treasury and the UK’s financial regulators have signalled their intention to clampdown on the £3.1-trillion-a day foreign exchange market in the wake of the abuse allegations that have hit confidence in currency benchmarks.
A Treasury spokesperson said yesterday that ensuring “confidence and efficiency of financial markets” are central to the Coalition’s economic objectives. The spokesperson added the government would use the lessons from the Libor interest rate rigging scandal “to inform and shape the important ongoing global debate on benchmark reform”.
A dozen regulators around the world are investigating claims that more than 15 banks colluded to rig forex markets. The vast majority of trades in foreign exchange markets, which are presently largely unregulated, take place between financial institutions operating in the City of London. The financial industry has cautioned against a regulatory clampdown, arguing that it would drive up costs for ordinary investors.
The Financial Stability Board global umbrella regulator, headed by Bank of England Governor Mark Carney, will deliver a report on benchmarks, including forex, at the G20 summit in November.