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By Huw Jones and William Schomberg
LONDON, June 10 (Reuters) - Britain announced plans to clampdown on abuse in financial markets on Wednesday after a stringof scandals that sullied the reputation of the financial systemand have so far cost banks $19 billion in fines.
Under the proposals, criminal penalties currently in placefor insider trading in shares would be extended to fixed-income,currency and commodity (FICC) markets with jail sentences foroffenders lengthened to up to 10 years.
So-called "rolling bad apples" or individuals who are firedfrom financial firms would no longer be able to move to anotherjob without their new employer knowing about their history.
And far more managers in FICC markets would be on the hookfor making sure that their staff stick to the rules althoughunlike bankers they will not automatically be presumed to beresponsible for misconduct on their watch, potentially weakeningits impact.
Bank of England Governor Mark Carney said central banks hadshared in the failings of the system in the past. The newaccountability rules would extend to him and his deputies at theBoE which was caught up in a foreign exchange scandal last year.
Carney said real markets were essential to guaranteeprosperity.
"Not markets that collapse when there is a shock fromabroad. Not markets where transactions occur in chat rooms. Notmarkets where no one appears accountable for anything," he said.
His comments were made in excerpts of an annual speech hewas due to give later on Wednesday to London's finance industrychiefs.
The Fair and Effective Markets Review -- which aims to pluggaps in the largely unregulated foreign exchange market inparticular -- was ordered by British finance minister GeorgeOsborne a year ago after several British banks were finedbillions of pounds in 2013 for trying to rig a widely usedinterest rate benchmark, the London Interbank Offered Rate orLibor.
Some of the same banks were hit later by more fines fortrying to manipulate the $5 trillion-a-day foreign exchangemarket at a time when the Libor rigging was being uncovered.
"Individuals who fraudulently manipulate markets and commitfinancial crime should be treated like the criminals they are --and they will be," Osborne said.
The review was carried out jointly by the Bank of England,the Financial Conduct Authority (FCA), Britain's top marketsregulator, and the finance ministry.
Britain has already introduced a law to prevent manipulationof eight major market benchmark rates, including those at thecentre of the Libor and foreign exchange scandals. Those rulesfeature the threat of prison sentences which will be increasedunder the new proposals.
The European Union is also close to approving a law totighten supervision of market benchmarks after agreeing tougherrules to penalise abusive trading practices and to inject moretransparency into trading.
The success of Britain's review will largely hinge onwhether regulators from other parts of the world follow suit,given the global nature of the markets involved.
Carney, who chairs a global regulators body, the FinancialStability Board, was due to say in his speech that he would urgehis peers at a meeting in London next week to adopt similarmeasures.
Some market experts have previously said the creation of anew Markets Standards Board -- one of the proposals made onWednesday -- may duplicate some of the responsibilities of theFCA, while having little or no enforcement powers of its own.
Carney said that if firms did not meet the standards set bythe new board, tougher rules would be inevitable.
Carney made no mention of British monetary policy in hisspeech.
In his 2014 speech at the Mansion House, the officialresidence of London's lord mayor, Carney told investors thatinterest rates could rise sooner than they were expecting,startling markets and causing a jump in sterling.
But the plunge in global oil prices in the second half of2014 pushed back expectations of when rates would rise, leadingto some criticism of Carney for giving confusing guidance on theBank's likely next steps. (Reporting by Huw Jones and William Schomberg)
