MPs call for banking sector ‘shake-up’ following ‘appalling’ forex scandal
MPs have said the forex scandal shows the banking sector is still in desperate need of a shake-up.
Andrew Tyrie MP and three other former members of the parliamentary commission on banking standards (PCBS) issued a joint statement saying the forex scandal, coming so soon after Libor, shows there's still much work to be done in terms of improving the way banks are regulated.
It called for the full implementation of recommendations put forward in the commission's final report relating to areas such as banking structure, individual responsibility and bankers' pay. This included overhauling regulatory frameworks in order to make bankers more accountable for their actions and bonus clawbacks – but the letter said they're "yet to be fully implemented" by banks and regulators.
Last week the Financial Conduct Authority slapped five banks with fines relating to the forex rigging scandal totalling £1.1bn. It followed a year-long investigation where a number of banks were found to have failed to control business practices in their foreign exchange departments. Tyrie said:
The fact that, several years after the Libor scandal broke, the forex market may have been similarly exposed to rigging is extremely concerning. The PCBS made wide-ranging proposals to deter such behaviour, but banks and regulators do not yet appear to be full implementing them.
As time passes, the pressure for reform will weaken. The old system failing disasterously – the forex settlement is a stark reminder of this. Maintaining or resuscitating parts of the failed system, whether at the behest of bank lobbying or for the convenience of regulators, must not be permitted to happen
Additionally, the statement also said bankers' pay "lay at the heart of some of the banks' biggest problems". Banks pay structures still continue to encourage bad behaviour and provide rewards when ill-justified, it said.
According to the FT, Royal Bank of Scotland, HSBC, UBS, JP Morgan and Citi will claw back bankers' bonuses in an attempt to make reparations for their involvement in the forex rigging scandal.