Tougher oversight of foreign exchange market expected to be unveiled

George Osborne's speech this year in front of London's financial community comes as investigations into claims of rigging of foreign exchange market. Photograph: Oli Scarff/Getty Images

The chancellor, George Osborne, is expected to announce measures to increase oversight of the £3tn-a-day foreign exchange market as investigations continue into the latest allegations of benchmark-fixing in the City.

Osborne could unveil the changes on 12 June in his Mansion House speech, an annual set piece in front of London's financial community, where he will appear alongside the Bank of England governor, Mark Carney. Both men have stated their desire to clean up Britain's banking industry.

Under the proposals manipulation of the foreign exchange market could be subjected to the same, toughened regime as for Libor. The government acted last year to bring setting of the Libor interest rate within the remit of statutory regulation for the first time, making attempted manipulation of the benchmarker a criminal offence.

A Treasury spokesman declined to comment on the details or exact timing of any announcement by Osborne, which was first reported by the BBC. The spokesman said the Treasury was keen to influence new international rules on benchmarks for financial instruments.

"Ensuring confidence in the fairness and effectiveness of financial markets is central … which is why we've taken action to reform Libor, and why we're now using the lessons we have learned here to inform and shape the important ongoing global debate on benchmark reform," he said.

The Financial Stability Board (FSB), a global body chaired by Carney, is expected to report next month on how to improve currency fixings. The UK's Financial Conduct Authority is conducting an investigation into the foreign exchange market, with the US department of justice also launching an inquiry.

Last week Carney said he wanted the FSB to recommend changes that would affect how markets set benchmarks such as Libor and foreign exchange fixings.

"Merely prosecuting the guilty to the full extent of the law will not be sufficient to address the issues raised. Authorities and market participants must also act to recreate fair and effective markets," he said in a speech.

In March the Bank of England suspended a member of staff in connection with its review of the foreign exchange market and launched a formal inquiry into whether its staff knew about potential market rigging.

Speaking to MPs the same month, Carney said the Bank was "ruthlessly and relentlessly" investigating what had happened in foreign exchange markets.

He said the alleged rigging could become a worse scandal than Libor, telling MPs: "This is as serious as Libor, if not more so, because this goes to the heart of integrity of markets. We cannot come out of this with a shadow of doubt about the integrity of the Bank of England."