Bank of England warns City Misconduct is Undermining Public Trust

Courtesy of Jill Treanor @ The Guardian:

The Bank of England has warned of “deep-rooted problems” in the City that are undermining public trust in the financial system, as it launched a sweeping review intended to wipe out market manipulation.

In her first speech as deputy governor of the Bank of England, Nemat “Minouche” Shafik said the behaviour of traders in foreign exchange, currencies and bonds markets pointed to a pattern of behaviour that goes beyond a few rogue players.

Saying she had found the behaviour of Libor riggers outrageous, Shafik said that the ongoing fines for misconduct were “like salt rubbed into the wounds to public confidence in financial markets”.

About £4bn of fines have already been levied for manipulation of key benchmark rates such as Libor and the City is braced for fines for rigging the currency markets to be announced next month.

“Public outrage is based on the fact that rewards in finance are disproportionate and the system is rigged. When people read of malpractice in financial markets, of trading profits being claimed through manipulation, collusion or dishonesty, they naturally wonder if they are one of the people who have been wronged,” said Shafik.

She was speaking at the London School of Economics as she launched a much-anticipated consultation into the markets for fixed income, foreign exchange and commodities, which are collectively known as FICC and generated $117bn (£72bn) of revenues for the big investment banks in 2013. These are global markets and any cleanup efforts would need international cooperation.

George Osborne commissioned the review in his Mansion House speech in June and it is due to report next June, after the general election.

“The integrity of the City matters to the economy of Britain. Markets here set the interest rates for people’s mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy,” the chancellor said on Monday.

Shafik said these markets affected everyone’s lives. They are huge, she said, describing how the global stock of bonds was worth about $100tn (£62tn) in 2013 – bigger than world GDP.

“The initial argument that it is just the case of a ‘few bad apples’ is not longer credible. Instead it seems that there were deep-rooted problems in the nature of the FICC markets that resulted in practices that would be unacceptable elsewhere,” said Shafik. Continue reading


The medieval, unaccountable Corporation of London is ripe for protest

An old one from George Monboit @ The Guardian:

It’s the dark heart of Britain, the place where democracy goes to die, immensely powerful, equally unaccountable. But I doubt that one in 10 British people has any idea of what the Corporation of the City of London is and how it works. This could be about to change. Alongside the Church of England, the Corporation is seeking to evict the protesters camped outside St Paul’s cathedral. The protesters, in turn, have demanded that it submit to national oversight and control.

What is this thing? Ostensibly it’s the equivalent of a local council, responsible for a small area of London known as the Square Mile. But, as its website boasts, “among local authorities the City of London is unique”. You bet it is. There are 25 electoral wards in the Square Mile. In four of them, the 9,000 people who live within its boundaries are permitted to vote. In the remaining 21, the votes are controlled by corporations, mostly banks and other financial companies. The bigger the business, the bigger the vote: a company with 10 workers gets two votes, the biggest employers, 79. It’s not the workers who decide how the votes are cast, but the bosses, who “appoint” the voters. Plutocracy, pure and simple.


There are four layers of elected representatives in the Corporation: common councilmen, aldermen, sheriffs and the Lord Mayor. To qualify for any of these offices, you must be a freeman of the City of London. To become a freeman you must be approved by the aldermen. You’re most likely to qualify if you belong to one of the City livery companies: medieval guilds such as the worshipful company of costermongers, cutpurses and safecrackers. To become a sheriff, you must be elected from among the aldermen by the Livery. How do you join a livery company? Don’t even ask.

Continue reading