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Bank of England suspends employee amid forex investigation Bank of England employee suspended amid forex investigation
(about 3 hours later)
The continuing investigation into potential rigging of foreign exchange markets took an unexpected twist on Wednesday when the Bank of England revealed it has suspended one of its members of staff in connection with its own review of the £3tn a day market. The continuing investigation into potential rigging of foreign exchange markets took an unexpected twist on Wednesday when the Bank of England suspended a member of staff in connection with its own review of the £3tn a day market and began a formal inquiry into whether its staff knew about potential market rigging.
The step was taken following an internal review sparked by a suggestion that a group of traders had told the central bank they were exchanging information about their client's positions – one of the main themes of an investigation by regulators around the globe. The Bank also took the unusual step of releasing minutes of meetings held over six years until a year ago between Bank officials and of a group of foreign exchange traders who met three or four years a year which indicate that the possibility of fixing the market had been discussed as along ago as 2006.
The Bank escalated this investigation into its own practices on Wednesday, appointing the oversight committee of the Bank's court of directors – akin to a board of directors – to look into whether officials condoned manipulation of foreign exchange prices. A suggestion that a group of traders had told the central bank the were exchanging information about their client's positions – one of the main themes of an investigation by regulators around the globe - in 2012 had sparked the initial internal review which in turn led the suspension of the official.
Lawyers from Travers Smith will conduct the review, which it promises to publish. The Bank escalated this investigation into its own practices on Wednesday, appointing the oversight committee of the Bank's court of directors – akin to the non-executive directors on a board – to look into whether officials condoned manipulation of foreign exchange prices.
The law firm has already been involved in an initial review of documents, including 15,000 emails, 21,000 Bloomberg and Reuters chat room records and more than 40 hours of telephone call recordings. The review found no evidence of collusion. Nevertheless the bank said it had suspended an employee. Lawyers from Travers Smith will conduct the formal inquiry for the committee, which the Bank promises to publish.
The law firm has already been involved in the initial review of documents, including 15,000 emails, 21,000 Bloomberg and Reuters chat room records and more than 40 hours of telephone call recordings. The review found no evidence of collusion. Nevertheless the bank said it had suspended an employee.
"The Bank requires its staff to follow rigorous internal control processes and has today suspended a member of staff, pending investigation by the Bank into compliance with those processes" the Bank said."The Bank requires its staff to follow rigorous internal control processes and has today suspended a member of staff, pending investigation by the Bank into compliance with those processes" the Bank said.
"The Bank of England does not condone any form of market manipulation in any context whatsoever. The Bank has today reiterated its guidance to staff regarding management of records and escalation of important information," it added."The Bank of England does not condone any form of market manipulation in any context whatsoever. The Bank has today reiterated its guidance to staff regarding management of records and escalation of important information," it added.
Last month the focus turned to a meeting between key officials at the central bank and leading foreign exchange dealers in April 2012, when they discussed the way they handled trades ahead of the crucial setting of a benchmark in the prices of major currencies. Foreign exchange dealers have been meeting with the Bank three or four times a year since 2005 but these meetings have not taken place since February 2013, the Bank said on Wednesday. The central bank has published minutes of the meetings of its foreign exchange dealer group from the past seven years. Pat McFadden, the Labour MP who sits on the Treasury select committee, said there needed to honesty in the foreign exchange market, where London accounts for 40% of the trade. "The reputational risks for the Bank of England in this matter are enormous," McFadden said.
The Bank of England had previously released brief details of the April 2012 meeting, but Bloomberg had reported that a senior trader who attended the meeting had made notes showing that officials did not believe it was improper to share customer orders. Last month the focus turned to a meeting between key officials at the central bank and leading foreign exchange dealers in April 2012, when they discussed the way they handled trades ahead of the crucial daily setting of a benchmark in the prices of major currencies and the most closely-scrutinised fix at 4pm each day. Foreign exchange dealers had been meeting with the Bank three or four times a year since 2005 but these meetings have not taken place since February 2013, the Bank said on Wednesday.
The central bank on Wednesday published minutes of all those meetings - held at restaurants across the City and attended by the major foreign exchange traders from 10 or so major banks and chaired by Bank official Martin Mallett - but had previously released brief details of the April 2012 meeting at which Bloomberg said a senior trader had made notes showing that officials did not believe it was improper to share customer orders.
The benchmark – known as WM – is at the centre of a broadening investigation by the Financial Conduct Authority and investigators in the US and Switzerland. It is used to price a wide range of financial products but has been called into question after suggestions traders were sharing information about orders from clients in a way that could affect the price of the benchmark.The benchmark – known as WM – is at the centre of a broadening investigation by the Financial Conduct Authority and investigators in the US and Switzerland. It is used to price a wide range of financial products but has been called into question after suggestions traders were sharing information about orders from clients in a way that could affect the price of the benchmark.
According to the minutes of the meetings of the foreign exchange committee, the bank had first discussed possible manipulation of the markets in 2006. "It was noted that there was evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix. This was not in the interest of customers if the market was forced away from where it should be when the fixing snapshot was taken. It was noted that 'fixing business' generally was becoming increasingly fraught due to this behaviour," the minutes from July 2006 - held in the Smith's restaurant in the City - said.
The matter was discussed at the highest levels within the bank at the meeting of the court - chaired by Sir David Lees but attended by governor Mark Carney - in December 2013 and focused on the "fix" of the benchmark at 4pm each day.
"No decision has been taken on disciplinary action against any member of Bank staff. The Bank continues to support the Financial Conduct Authority's investigation into the foreign exchange market. In these circumstances, it would not be appropriate for the Bank to make any further comment on this matter," the Bank said.
More than 20 individuals have either been suspended or fired as regulators around the world investigate allegations of rigging in the currency markets.