Malaysia to Launch Code of Conduct for FX and Money Markets

Bank Negara
Malaysia is issuing a policy document on a proposed Code of Conduct for
Malaysian wholesale financial markets “to uphold professionalism and integrity
in the financial markets”.

The draft
sets out principles and standards to be observed by market participants in the
Malaysian wholesale financial markets, including FX and money markets.  It also outlines the administrative, civil and
criminal actions that may be undertaken by Bank Negara on misconduct

Market
participants are invited to provide written feedback on the draft, including
suggestions on areas requiring further clarity and alternative proposals that
Bank Negara should consider, ahead of a proposed release early in 2017.

Announcing
the Code, Bank Negara Governor Datuk Muhammad bin Ibrahim argued it is timely
for industry associations to play a greater role in self-regulating their
members and to enforce strict codes of conduct, professionalism and ethical
standards. “Maintaining high standards of market conduct and ensuring the
orderly functioning of financial markets is vital to ensure continued public
confidence in our financial system,’ he said. “This is because financial
markets have important linkages and interdependencies to the promotion of
monetary stability and financial conditions of the economy.”

The
governor further noted the “many” findings of serious market misconduct,
ethical lapses and compliance failures at financial institutions globally that
has eroded public trust on the integrity of financial markets. “These
institutions, in their pursuit of profits, have even coerced each other in
manipulating financial benchmark rates such as the Libor,” he said. “As a
result, we have seen regulators in the United States, the UK and the European
Union taking regulatory actions against global financial institutions. Global
banks were fined staggering amounts (more than $9 billion) and criminal charges
were pressed against dishonest traders and brokers. Similarly, six global banks
in the USA were ordered to pay more than $5.6 billion for engaging in collusive
practices that manipulate currency exchange rates.

“We have no
tolerance for such misconducts in our own markets,” he continued. “We must
remain vigilant and vigorous when it comes to any issue impacting the integrity
of our markets or its participants.

The
governor stressed the bank’s Code of Conduct will be adopted by the industry
and scope all activities within the foreign exchange and money markets as well
as activities of regulated entities in other markets. “Hence, the Code of
Conduct will also be applicable to fund management companies, corporations and
providers of electronic trading or broking systems that deal in the wholesale
financial market, as well as interbank players in the bond markets,” he said.

“The Code
of Conduct sets out very clear principles and standards to be observed by market
participants and lays out the role of industry associations in preserving
market order and stability,” he added. “It will also include enhanced
requirements for institutions to have robust systems and internal controls to
safeguard the professionalism and integrity of the financial markets.

“With the
Code of Conduct, we expect the financial market community to develop and
maintain a corporate culture that emphasises the importance of professionalism
and ethical standards, compliance with laws and regulations and consumer
protection,” he continued. “All of these will be supported by strong and
effective oversight by senior management. Explicit responsibilities will be
placed on the senior management to set “the right tone from the top” in shaping
the core values and culture of the institution.”

Colin_lambert@profit-loss.com

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Colin Lambert

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