British MPs Urge Bank Regulation after Forex Scandal

British MPs Urge Bank Regulation after Forex Scandal

A British parliamentary group on Monday urged action to regulate banks after a scandal over misconduct by foreign exchange traders saying that previous reform proposals had been so far ignored by lenders.

The chairman of the Parliamentary Commission on Banking Standards said that a report by the group showed that recommendations made after another scandal over rate-rigging had not been implemented.

“They certainly must not be diluted,” said Andrew Tyrie, who is also head of the main parliament committee in charge of financial regulation.

The recommendations include ring-fencing banks’ retail operations from risky investment arms and cancelling bonuses when serious misconduct emerges.

“The UK cannot afford to go through the next business cycle without, as a minimum, the protection of an effective and electrified ring fence,” he said.

Global regulators last week announced $4.2 billion (3.4 billion euros) in fines against six major US and European banks for attempting to manipulate the global foreign exchange market, which is centred in London.

The scandal, in which supposedly rival traders appeared to team up to skew prices at the expense of clients, has sparked calls in Britain for tighter controls over the country’s banks.

Tyrie said this showed the need for “much closer scrutiny”.

“It is also crucial that traders and other staff that can cause serious harm have ‘skin in the game’ for longer.

Parts of their performance-based pay should be deferred for a long period and capable of cancellation when serious misconduct emerges,” he said.

Tyrie’s commission was established in the wake of the Libor rate-rigging scandal in 2012 and Tyrie said it was “extremely concerning” that the forex market had been subject to similar manipulation.

“The PCBS made wide-ranging proposals to deter such behaviour but banks and regulators do not yet appear to be fully implementing them,” he said.

“None of our reforms have yet been implemented by banks,” he said, adding: “The numerous and varied problems in banking that we identified remain, therefore, unaddressed”.