LONDON: Britain will effectively make adherence to the new global code of conduct for currency markets mandatory by linking it to an existing plan for senior managers to be legally responsible for employees’ conduct, banking sector sources said on Friday.

A Bank for International Settlements committee has been working on the code of conduct for a year as part of efforts to rebuild trust in a foreign exchange market plagued by scandals and accusations of manipulation.

Mechanisms it is considering include asking banks and other financial firms — or senior staff members — to “attest” that their businesses will observe the code, which bans dealers from lying and starting false rumours, among other strictures.

The Bank of England’s director for markets, Chris Salmon, spoke in favour of that model this week while also pointing to the “supportive” nature of other measures aimed at cleaning up the currency market, notably Britain’s own Senior Managers and Certification Regime, which will cover FX traders from 2018.

He stopped short of saying that managers would be held legally accountable for their firms’ adherence to the global code, stressing — as has the Australian BIS official leading work on it — that the guidelines will be voluntary.

But two banking sector sources pointed to the Financial Conduct Authority’s handbook, where footnotes to the section on senior managers’ responsibilities say they must ensure compliance with standards including relevant industry codes.

The Senior Managers and Certification Regime also requires staff that come within its scope to not only comply with legally binding rules and regulations, but also with industry codes of conduct, threatening sanctions for those that breach them.

Regulators have responded to a series of market-rigging scandals by revamping and strengthening codes of conduct for dealers but critics argue the new rules will be ineffective unless they are legally enforceable.

The BoE’s Salmon addressed those concerns in a speech on Wednesday to the ACI association of currency dealers in London, where about 40 percent of all currency trading happens.

“A sceptic might question the prospects for the success of this initiative,” he said. “In a market where information asymmetries have been exploited for selfish motives — what good can a voluntary code of conduct really achieve?”

He laid out several reasons why banks and financial institutions were likely to respect the code, the first full draft of which — including new sections on electronic trading and adherence — is due to be circulated by the BIS next month. Officials expect to publish the final version next year.

“The widespread use of a common public attestation could be a powerful tool” for firms to show their behaviour and practices in the FX market are in line with the code’s principles, he said, adding that an industry kite-mark might also be developed.

“It would provide a strong signal of a firm’s commitment to following good practices and help focus the mind of the firm’s senior management, who would be asked to sign the attestation,” Salmon told the ACI.—Reuters