Fair and Effective Markets Review Released
by Barbara Ridpath
Posted: 11 Jun 2015
Yesterday afternoon, the Bank of England, HMTreasury and the Financial Conduct Authority released their long-awaited review of market practice. As St Paul's Institute has long stated, including in our submission letter to the public consultation, they deserve to be applauded for having initiated this important review, which goes to the very root of what it means to be a 'market economy'.
It is too early to say if the proposed changes will make a significant difference, but there is one innovation that deserves both mention and praise. The Bank of England has created an Open Forum, where members of the public can comment on market operations, on whatever topic and at whatever level they wish. To the extent the initial consultation received replies largely from market participants, this newest step actually encourages the wider public to engage. The Institute strongly encourages a close reading of the Open Forum paper, which is more accessible than the Review itself, and considered replies to the Open Forum email on the Bank of England website.
Trust is required for exchange. When we lose trust transaction costs increase due to the need for infrastructure, contracts, and legal sanctions to replace lost confidence. The Review is long on sticks, but short on carrots; that is it provides many sanctions including penalties and prison terms for bad behaviour, but few incentives for good behaviour. There is still some distance to travel if we are to restore trust, rather than simply provide expensive replacements for it.
We look forward to continuing to engage in this important conversation on how to re-establish trust in the financial sector. Watch this space for further work on this topic.
 I am indebted to Theonomics: Reconnecting Economics with Virtue and Integrity, edited by Andrew Lightbown and Peter Sills, Sacristy Press, 2014, for clarifying my thinking on this issue.
The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.