Bonds  

The FCA must act on structured bonds

Gregory Stoloff

Gregory Stoloff

And it is even more important that regulators should hold banks to account to provide investors liquidity in structured debt products, because the banks can at any time make an unscrupulous profit from their structured desks.

This can be done by suggesting inappropriate indexes for the bond to be based on, by not providing fair market pricing, by not repurchasing the bond as they agreed they would, or by misrepresenting positions to investors.

In the past banks have taken care to comply with their duties to investors, understanding that the credibility of the whole market rests on investor confidence that a liquid market will always be provided for these structured products.

But in times of economic pressure, or with unscrupulous new entrants into this complex market, the risks of systemic failure are right around the corner if banks seek to evade their duty to provide investors with real-time market pricing and repurchase facilities.

This is why the role of the regulator is vital in this area.

The Bank of England and the FCA must act now, or consumer confidence in the UK money markets will be lost.

Gregory Stoloff is a Trustee of the Stoloff Family Superannuation Fund