Traders found guilty of involvement in benchmark rigging should face much tougher sanctions than those currently handed down, said David Wright, head of the International Organization of Securities Commissions,
“It seems every week at the moment more serious problems in financial markets are emerging,” Wright said today by e-mail. Rigging allegations concerning markets from interbank lending to foreign exchange show the need for sanctions that are “far more” of a deterrent to wrongdoing, he said.
“It is evident to everyone that the financial industry has got to clean up big time and start behaving in the interest of their clients, and indeed society as a whole, if trust in financial markets is to be recovered,” Wright said.
Regulators are grappling with how to respond to rate-rigging scandals. More than a dozen authorities on three continents are reviewing whether traders colluded to rig the currency market, while nine firms have been fined more than $6 billion for manipulating the London interbank offered rate, a rate used to price more than $300 trillion of contracts from student loans to mortgages.
The European Union proposed measures last year to toughen regulation of benchmarks, building on recommendations from IOSCO, a global group whose members are markets watchdogs from over 100 countries.
The Financial Stability Board, an organization bringing together regulators, central bankers and government officials from the Group of 20 nations, has also set up working groups to look at benchmark governance and alternatives to scandal-ridden rates. An FSB group on the foreign-exchange markets is set to report by a meeting of G-20 leaders in November.
U.K. Chancellor of the Exchequer George Osborne is preparing to announce plans to boost oversight of the foreign-exchange market following the allegations of manipulation. The measures are being considered in conjunction with the FSB, according to a government official who asked not to be identified.