By Daniel Hunter
Small businesses and legal experts have welcomed the Financial Conduct Authority’s (FCA) move to regulate seven additional financial benchmarks from 2015.
From April, the government will extend the legislation put in place to regulate Libor to cover seven further financial benchmarks. It also means that those found guilty of manipulating them could face criminal charges.
The Chancellor George Osborne yesterday (Monday) announced that rigging foreign currency markets will become a criminal offence, adding that the FCA would be given greater responsibility for regulating certain markets. The FCA will regulate the following markets:
· SONIA (Sterling Overnight Index Average) and RONIA (Repurchase Overnight Index Average), which both serve as reference rates for overnight index swaps
· WM/Reuters London 4pm Closing Spot Rate, which is the dominant global foreign exchange benchmark
· ISDAFIX, which is the principal global benchmark for swap rates and spreads for interest rate swap transactions
· London Gold Fixing and the LMBA Silver Price, which determine the price of gold and silver in the London market
· ICE Brent Index, traded on the ICE Futures Europe (IFEU) exchange, which acts as the crude oil futures market’s principal financial benchmark.
The move comes months after major banks were fined for manipulating LIBOR rates and using customers’ confidential information to push customers into selling their currency holdings in order to make a profit, in spite of a loss for the client. The process of trying to bring criminal proceedings against those involved in the manipulation of LIBOR has since been long and drawn out, with much criticism.
According to independent law firm, Berg, who acts for a number of small businesses on banking issues, the regulator is now seeking to make this process easier, and the changes will give small businesses more confidence in the dealings with the banks.
“The FCA’s decision to regulate more financial benchmarks means that more focus is being placed on identifying manipulation as it happens, rather than after victims have been negatively impacted,” said Kalvin Chapman, a solicitor at Berg.
“It also increases the ability of the regulators and relevant bodies to bring regulatory and criminal actions against the individuals involved as well as the bank involved, which can only be a good thing.”
Berg believes that customers will now be able to have a greater understanding of what the benchmarks are, and have faith that they have not been manipulated to benefit the banks. However it warns that regulators should make it clear to the banks that they can no longer ‘get away with’ misleading customers.
Mr Chapman added: “In recent months there has appeared to be a lack of individual accountability around banking cases, which is not fair, particularly for the people that have been impacted. Banks cannot simply pay a fine and continue with business as usual.
“This extension is a perfect opportunity for the regulator properly assert itself and enforce regulations and legislation that it has at its disposal.”
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