BoE's Carney calls for tougher penalties for market abuse

Mark Carney to talk tough on market abuse
Mark Carney to talk tough on market abuse   

Mark Carney, the governor of the Bank of England, announced looming harsher sentences for bankers guilty of market abuse in the U.K. on Wednesday.

The maximum sentences for those found guilty of market abuse should be extended to 10 years from seven years and more kinds of abuse should be subject to criminal charges, according to the bank's "fair and effective markets review," commissioned by Carney and published on Wednesday.

Senior managers at both banks and insurers should face new potential censures, as they will be held directly responsible for "failures in their areas of responsibility" according to Carney. These could include substantial fines if misconduct happens under their watch, although managers will not face criminal charges unless believed to be part of the conspiracy.

Carney gave a speech at London's Mansion House on Wednesday evening, in which he accused financial services companies of "ethical drift" and said that markets need a "social license" to operate.

Bank of England Governor Mark Carney
Getty Images
Bank of England Governor Mark Carney

The Canadian's speech had been touted as an end to "banker-bashing," but it included plenty of criticism of historic actions by banks.

"Unethical behavior went unchecked, proliferated and eventually became the norm," he said.

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Remuneration and conduct risk should be better aligned, Carney argued. While new powers to claw back pay from employees have been granted, there are concerns that bonuses are still creating a short-term culture.

The bank has also called for a new "markets standard board" to set standards for trading in London, where 40 percent of foreign exchange trading and more than two-thirds of international bond trading takes place.

Carney spoke alongside U.K. Chancellor of the Exchequer George Osborne, who is expected to announce a new commitment to running a budgetary surplus under normal economic conditions, a move that is already under attack by economists before it has even been announced.

Will Osborne scrap the UK bank levy?
Will Osborne scrap the UK bank levy?   

Osborne will back the bank's plans and is expected to say: "There is no trade-off between high standards of conduct and competitiveness.

"The public rightly asks why it is that after so many scandals, and such cost to the country, so few individuals have faced punishment in the courts."

Later in the year, in Autumn, the Bank of England will hold a forum on how to build "real markets"—those that better help the overall economy.