Will the threat of four years in prison deter bankers from abusing the markets for their own gains? On Tuesday 4 February MEPs will debate and vote on new rules agreed with EU countries. The new legislation aims to avoid new cases such as the Libor scandal in which global financial institutions manipulated interest rates, affecting consumers as well as companies. We found out more about the new rules from report author Arlene McCarthy, a British member of the S&D group.
What are the sanctions set by the new rules?
Those committing insider dealing and market manipulation will be sent to jail for a maximum term of at least four years, while those who unlawfully disclose inside information will go to jail for a maximum term of at least two years. Member states can go further.
Will they be a strong enough deterrent?
Setting minimum EU levels of criminal sanctions is an important first step to ensuring financial crime is treated seriously and its role in the financial crisis is properly tackled. Also they will face criminal sanctions in all 28 EU member states. There are considerable differences between how members states sanction market abuse. Market manipulation is not a criminal offence in Austria, Bulgaria, Slovakia and Slovenia. Insider trading on the basis of tip-offs is not a criminal offence in Bulgaria, Czech Republic, Greece, Finland, Germany, Italy, Slovenia and Spain. Member states will now have to make this abuse a criminal offence.
Could you give us an example here in Europe of the kind of manipulation you are trying to address?
The Libor scandal was market manipulation of the worst kind. Financial traders manipulated interest rates and benchmarks which set the prices for $350 trillion in derivatives and around $10 trillion in loans and mortgages around the world in order to make vast sums of money. The new rules close a loophole which allowed banks and traders who manipulated Libor rates to escape jail. As no-one has yet been sent to prison for Libor manipulation, we urge member states to use their new powers to bring perpetrators of serious market abuse to justice.
Watch the debate and the press conference live on Tuesday 4 February by clicking on the links to the right