Bank of England Governor Mark Carney has presented 21 recommendations tabled by <i>The Fair and Effective Markets Review</i>. Bank of England Governor Mark Carney has presented 21 recommendations tabled by The Fair and Effective Markets Review. Photo: Reuters
 
The governor of the Bank of England and chair of the global Financial Stability Board, Mark Carney, is aggressively pushing ahead with new global standards to reign in wayward conduct of banks around the world, including Australia.
On Wednesday, Carney, a former Goldman Sachs banker that once headed the Bank of Canada, presented 21 recommendations tabled by The Fair and Effective Markets Review, which he helped establish to examine conduct and culture in London's financial markets.
Experts said the recommendations, which calls for tougher personal penalties in loosely regulated markets and greater oversight of hedge funds, will form the blueprint for global standards designed to restore trust in financial markets that had been eroded by a series of scandals in interest rate, bond and commodity markets.
"This is an important report for financial markets. They want this to be a platform for global policy discussion," said Deloitte lead risk partner Kevin Nixon, who was in little doubt that there would be a push for the final recommendations to be adopted around the world.
He said Mark Carney as chair of the Financial Stability Board was well placed to push for the proposed standards to be adopted globally and championed by other global bodies such as the Bank of International Settlements and IOSCO, which is currently chaired by Greg Medcraft of the Australian Securities and Investment Commission.
"He is calling for international action because it won't work if we don't all do it. We don't have to read the tea leaves."
The two bedrocks of the proposals are in raising standards of accountability among individuals and ensuring all recommendations are enforced globally.

Outlawed in equity markets

Behaviour that is outlawed in equity markets – but has prevailed in over the counter bond and currency markets – such as front running and insider trading will be subject to criminal sanctions.
Hedge fund managers will also be on alert. Patrolling bad behaviour will no longer be limited to banks but all market participants that have the potential to manipulate markets.
"The [recommendations] are now saying the market is made of more players and you'll all be held to account. If its bad practice for a group of banks, it's bad for a group of hedge funds. That's a big change," Mr Nixon said.
The recommendations presented by Carney come as local regulators step up the rhetoric in stamping out misconduct in financial markets calling for tougher penalties for bankers and institutions guilty of misconduct.
In December last year, the chair of ASIC Greg Medcraft pledged to "lift the fear and smother the greed" by using the real threat of jail time to stamp out white collar crime.
This week Medcraft told a Senate Committee that the behaviour of some institutions it was investigating for interest rate manipulation had been "absolutely appalling."
The comments are understood to have referred to the ANZ Banking Group, which in December stood down seven traders that are subject to an investigation by the corporate watchdog.
Also last week ASIC commissioner John Price said the regulator would target companies with bad culture and form part of its risk-based surveillance programme.
Meanwhile the chair of the Australian Prudential Regulation Authority, Wayne Byers, told an audience in Singapore last week that strengthening culture was critical to long-term financial stability suggesting that too many participants in financial markets had wayward ethics.

Something serious amiss

"For an industry that is ultimately founded on trust, something serious is amiss, and strong and ethical leadership within financial firms is needed to set this right," he said.
The chair of the government's financial system inquiry, David Murray, reaffirmed his support for tougher penalties for misconduct in financial services, and the need for more funding for the watchdog.
The inquiry, now being considered by the government, recommended the Australian Securities and Investments Commission have access to "substantially higher criminal and civil penalties" for policing misconduct, and that it be better resourced, via a fee for service on industry.
"We were charged with and gave significant effort into dealing with fair treatment of consumers in the market," Mr Murray said.
"We felt that the penalty regime was not tough enough and we put significant consideration into the effectiveness and accountability of the regulators."
Mr Murray did not comment on Mr Carney's report but he has previously compared ASIC's penalty regime to "being hit with a lettuce leaf."
The inquiry last year also raised "serious concerns" about the culture with in some firms but said changing the rules was only part of the answer.
"The report expressed our view that it's difficult to legislate for culture and I still believe that to be the case," Mr Murray said.