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Friday 23 August 2019

Post-crisis anxiety has caused ‘bottle necks’ in the financial system, warns market standards body

Craig Beevers, of the FICC Markets Standards Board, said liquidity had suffered because uncertainty had stopped City workers making certain trades.

Aerial views of London
Aerial views of London

By Ben Woods, Press Association Chief City Correspondent

Chief executives and traders in the City have been operating in a climate of fear following the banking crisis, causing “bottle necks” in the financial system.

Craig Beevers, senior technical adviser of the FICC Markets Standards Board (FMSB), said liquidity had suffered because post-crisis uncertainty had stopped City workers from making certain trades.

However, he said the FMSB’s efforts to improve standards had helped make the markets more active by giving traders and bosses the confidence to act.


Speaking to the Press Association, Mr Beevers said the body’s work was helping to repair the reputation of the City following a string of scandals centring on the foreign exchange market and Libor.

He said: “The reaction of the market post-crisis has really become one of ‘if I have 1% of doubt, I am not going to do it’.

“I cannot over emphasise this enough – it had a massive negative impact on liquidity because people were just too scared to do stuff.

“It is all the way down the organisation. You have got chief executives saying ‘I don’t want to be in that business area or dealing with that geography’.

“You have got traders who, on a minute by minute basis, can decide ‘I will pass on that one’ and I will do the next one because it is not really very clear.

“A big chunk of the work we have been doing is to provide clarification to remove some of those bottle necks and the uncertainty, because when they have clarity, they tend to be more active.”

The FMSB has issued four standards and four statements of good practice since coming into force two years ago following calls from the Bank of England and the Treasury to improve market conduct.

While billions of pounds worth of fines have been dished out in connection with forex rigging and the Libor scandal, the FMSB aims to improve the City’s governance and culture by giving workers greater clarity over how they should operate.

FMSB chief executive Gerry Harvey said: “Uncertainty creates anxiety and it creates difficulty, so where we can resolve some of those areas, we will.”

He added: “Efforts are clearly being made to shore up the reputation of the financial markets.

“Key financial institutions are coming together to say ‘right we are going to deal with this’ and they themselves are going to lead that and they are committing the resources and the time.

“They are going through hefty adherence processes to make sure that when they adopt standards that we produce they are getting that right in terms of the checks and controls.

“It is about restoring trust and confidence in the industry and it is market led.”

Around 50 financial institutions support the FMSB, from Barclays and Deutsche Bank to the London Stock Exchange Group and M&G Investments.

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