The Bank of England (BoE) has published the speech given by its Governor, Mark Carney at the Mansion House. The speech is entitled Building real markets for the good of the people.
In his speech Mr Carney discusses the historic failures of the fixed income, currency and commodities markets (FICC markets) and that financial reform is re-building real markets. He then discusses the final recommendations of the Fair and Effective Markets Review stating that with its publication “all the main building blocks are now in place for the real markets we need.” When discussing the final recommendations Mr Carney notes that “we need global standards for global markets”. He welcomes the FICC Markets Standards Board’s intent to be as global as possible in its membership and influence and adds that all major central banks and market participants have begun working on developing a new single Global Code for FX. He encourages the International Organization of Securities Commissions to consider complementing these efforts with a similar initiative to cover FICC markets as a whole when they meet in London next week. He also adds that the Financial Stability Board will engage with these processes and work to improve the alignment between remuneration and conduct risk across the globe.
Mr Carney states that “all must play a role in building real markets, including the Bank of England.” Mr Carney briefly describes the changes that the BoE has put into place following the financial crisis including a new, comprehensive framework for its sterling market operations. Mr Carney also mentions that the BoE expects its senior management to meet the highest standards of professional conduct and that it will be applying the core principles of the senior managers regime to its own staff, including the Governor.
In the final part of his speech Mr Carney states that the BoE welcomes scrutiny of its activities, including open debate about the cumulative impact of reform on the functioning of markets. He adds that in “particular, while the core of the system has been made more resilient, the combination of new prudential requirements on dealers and structural changes in markets has reduced market depth and increased potential volatility. This process likely has further to run, particularly as the normalisation of global monetary conditions edges closer. Firms and regulators should be alert to these developments, including their consequences for investment funds that offer daily liquidity while investing in securities that only appear liquid.”
In his conclusion Mr Carney announces that the BoE will be holding an Open Forum this Autumn which will bring together all stakeholders in FICC markets. He explains that the “purpose of the Forum is to discuss the prospects for market functioning, where regulations might overlap or conflict, and whether enough has been done to build the real markets the UK deserves.”
View Mansion House speech – Building real markets for the good of the people, 11 June 2015