In the consultation document, we ask whether that process should go further, whether through industry-led standardisation, removing barriers to entry for new electronic trading platforms or utilities, or further transparency enhancements to practices such as new issue allocation. Or could imposing standardisation or transparency standards in excess of those already in place harm, rather than enhance, market functioning and risk transfer? Do practices such as ‘internalisation’ – where banks match off client orders internally – pose any challenges? 2. Competition and market discipline  The second structural category is competition and market discipline. Concentration in some FICC markets is relatively high both amongst intermediaries and amongst the major asset managers, and has risen further since the financial crisis. For example, the top six dealers account for over 60% of the UK interdealer FX market. In some cases, firms have also engaged in horizontal or vertical integration – raising potential conflicts of interest and concerns about information asymmetries. A number of recent misconduct cases have involved attempted collusion, abuse of market power or inadequate management or control of conflicts. The ability of FICC market participants to exercise market discipline against those engaging in misconduct may also have diminished somewhat in recent years. At the same time, the market maker system has delivered important benefits, including tight pricing and deep and near-continuous liquidity in a wide range of market conditions.
It would seem that the least that we as prudential supervisor can do is ask the pertinent questions and challenge banks to look beyond governance in the stricter, more standard sense. I have tried to identify the kind of questions we might ask. I am very much looking forward to hearing your views in the ensuing discussion, which I hope and trust will be lively and stimulating. I promise we will reflect seriously on any suggestions that you might have. Thank you. 1. Kirkpatrick, G. (2009), “Corporate governance lessons from the financial crisis”, OECD Journal: Financial Market Trends, 2009/1(1), pp. 61-87; Saghi-Zedek, N. and Tarazi, A., (2015), “Excess control rights, financial crisis and bank profitability and risk”, Journal of Banking & Finance, No 55, pp. 361-79. 2. See SSM supervisory statement on governance and risk appetite, ECB, June 2016. 3. Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders under Directive 2013/36/EU and Directive 2014/65/EU (2021). 4.