Forex scandal rocks Bank of England

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By Delphine Strauss, Daniel Schäfer & Sam Fleming

Whatapp NewsTelegram News

The Bank of England became embroiled in the escalating foreign exchange scandal after it suspended a member of staff and launched a new investigation into allegations that its officials condoned or were aware of market manipulation.

The move is the latest twist in the global probe into the $5.3tn-a-day forex industry, the world’s largest financial market.

At least a dozen authorities across the US, Europe and Asia are conducting or assisting investigations into whether traders colluded to rig crucial price benchmarks. The scandal has prompted the suspension or dismissal of 22 traders at nine banks. The BoE said yesterday it had found no evidence of its staff colluding in market manipulation or sharing client information, but that it had suspended the staff member while investigating if internal control procedures were complied with.

The BoE said the oversight committee of its Court of Directors would now lead an investigation to assess whether its officials were involved in, or aware of, any improper forex practices.

According to minutes released by the BoE on Wednesday, an industry committee chaired by its own foreign exchange traders discussed evidence of potential manipulation as early as 2006.

The revelations will revive questions over the BoE’s governance structures. Mark Carney, the governor, is set to be questioned by parliament’s powerful Treasury select committee next week as MPs demand assurances that these are up to the job.

Pat McFadden, a Labour member of the committee, said: “We can’t have a situation where the BoE can be the judge and jury on its own role in this. This investigation has to be conducted by someone independent of the bank who can look at this with no vested interest.”

Andrew Tyrie, the chairman of the committee who has repeatedly criticised the way BoE executives are held to account internally, said the Court of Directors had not taken the initiative quickly enough in dealing with the matter.

“It appears to have taken the suspension of a bank employee for the oversight committee to be fully engaged,” he said.

The latest investigation follows an internal review started last year, conducted by law firm Travers Smith. The review was launched after claims emerged about an April 2012 meeting of the chief dealers subgroup. Senior traders at the meeting were told at the time not to take notes and that there would be no minutes about that part of the debate, two people close to the situation told the Financial Times earlier this year.

The minutes of the meeting, chaired by Martin Mallett, the BoE’s chief currency dealer, merely record “there was a brief discussion on extra levels of compliance that many bank trading desks were subject to when managing client risks around the main set piece benchmark fixings”.

Mr Mallett could not be reached for comment.

The BoE Wednesday “reiterated its guidance to staff regarding management of records and escalation of important information” – suggesting that the person who had been suspended may have failed to keep adequate records of meetings at which senior traders discussed practices around the fixings.

*FT


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