. uk / report / 2015 / fair - and - effective - markets - review - - - final - report all speeches are available online at www. bankofengland. co. uk / speeches we know that the city has a particular responsibility given london ’ s position as the pre - eminent global financial centre. what has been achieved? so what has been done to re - build the necessary market infrastructures for real markets to thrive? in the uk, laws and regulations have been strengthened by, for example, introducing a criminal regime for manipulating benchmarks. public authorities know they cannot and should not try to legislate for every circumstance, monitor every transaction, or anticipate every market innovation. as femr recognised, while fines and sanctions have roles in deterring misconduct, they will not, on their own, bring about the cultural change needed. we must move from an excessive reliance on punitive ex post fines of firms to greater emphasis on more compelling ex ante incentives for individuals, and ultimately a more solid grounding in improved firm culture. this starts with reducing opportunities for bad behaviour, for example, by overhauling the regulation of key benchmarks in ficc markets. it requires compensation rules that align risk and reward. in the uk, a significant proportion of variable compensation now must be deferred for a period of seven years. to address the ‘ rolling bad apples ’ problem, mechanisms are now in place here to ensure that when individuals move on their history will be known to those who consider hiring them. firms will be required to share information on breaches of individual conduct rules, their fitness and propriety assessments and outcomes around subsequent disciplinary proceedings. these measures are all very constructive but they are not yet sufficient. that ’ s why the bank of england supports initiatives that ensure firms and their employees take greater responsibility – individually and collectively – for their own conduct. uk authorities have used their convening powers to encourage market participants to establish standards of market practice that are well understood, widely followed and, crucially, that keep pace with market developments. industry has responded. the banking standards board is promoting higher standards of conduct and competence across the uk banking system. the global ficc market standards board ( fmsb ) is the uk accounts for 40 % of both global fx volumes and trades in otc interest rate derivatives, and two - thirds of trading in international bonds. more international banking activity is booked in london than anywhere else. and finance is one of the largest sectors of

not organized as shareholding companies for ensuring high - quality core capital comparable with the quality of the core capital of the shareholding companies. also, deductive items and prudential filters will be harmonized on an international level and will be applied at the level of a shareholding capital or its equivalent in the case of the legal entities which are not organized as shareholding companies. moreover, all components of the capital will be fully published. - introduction of a leverage ratio as an additional measure of the risk - based basel 2 framework, in order to include it in the treatment envisaged in the first pillar in the future, on the basis of an appropriate analysis. so as to provide comparability, the details about the leverage ratio will be harmonized on an international level, with full adjustment of the accounting differences. - introduction of a minimum global standard for providing liquidity for the financing needs which cover the compulsory rate of coverage of the liquidity in stressscenarios, backed by a long - term rate of structural liquidity. - establishing of counter - cyclical capital buffers above the minimum compulsory level. this framework will include measures for maintaining the capital, such as restrictions on the possibility for allocation of the capital elements. the basel committee will take into account an appropriate group of indicators, such as the indicators of profit and credits, as a way of ensuring the creation and utilization of the capital buffers. the committee will endorse a manner of determining the provisions which will be based on the future expected losses. - development of recommendations for reduction of the systemic risk related to rehabilitation of the internationally active banks. - the group of governors and responsible persons for the supervision, supported the below mentioned principles for directing the supervisors in the shift toward a higher level of capital in the banking system : - on the basis of the framework for counter - cyclical capital buffers, supervisors should require from the banks to strengthen their capital through a combination of the measures for maintaining the capital including activities for restricting the excessive payments of dividends, of purchase of own shares and compensations for the senior executives. - compensations for the senior executives should correspond with the reasonable undertaking of risks and long - term sustainable operations, based on the principles of granting compensations to the senior executives issued by the financial stability board. - the banks will be obliged to react promptly towards increasing the level and the quality of the capital in accordance with the new standards, in a way that will support the stability of the national