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Bank of England to restructure amid rate manipulation claims Bank of England in shake-up after rate manipulation criticism
(about 1 hour later)
The Bank of England will restructure following claims that some of its officials knew about alleged foreign exchange rate fixing. The Bank of England will tighten its governance after criticism of its response to claims of manipulation of foreign exchange (forex) rates.
Governor Mark Carney told MPs on the Treasury Committee that it would create a new deputy governor position with responsibility for markets and banking.Governor Mark Carney told MPs on the Treasury Committee that it would create a new deputy governor position with responsibility for markets and banking.
He said the person would carry out "a root and branch review" of how the Bank conducts market intelligence, He said the person would carry out "a root and branch review" of how the Bank conducts market intelligence.
But he said it had no warning of the alleged manipulation before October. It comes amid claims that some bank officials knew of alleged forex fixing.
It has been claimed that currency traders colluded via online chatrooms and instant messaging to manipulate forex rates.
During more than four hours of questioning on a variety to topics, Mr Carney said: "This is as serious as Libor if not more so because this goes to the heart of integrity of markets and we have to establish the integrity of markets."
But he said the bank had no warning of the alleged manipulation before October.
The Bank currently has three deputy governors, with responsibility for monetary policy, financial stability and prudential regulation.The Bank currently has three deputy governors, with responsibility for monetary policy, financial stability and prudential regulation.
The Treasury Committee hearing was aimed at finding out what Bank officials knew of the alleged foreign exchange rate fixing claims. The Treasury Committee hearing was aimed at finding out what Bank officials knew of the foreign exchange rate fixing claims.
Mr Carney said he first became aware of the allegations on 16 October.Mr Carney said he first became aware of the allegations on 16 October.
And he said that within 48 hours of hearing the allegations, the Bank had called in law firm Travis Smith to conduct an independent investigation.And he said that within 48 hours of hearing the allegations, the Bank had called in law firm Travis Smith to conduct an independent investigation.
Mr Carney said it had no information that anyone from the Bank condoned, facilitated or took part in market manipulation.
"We can't come out of this with a shadow of doubt about the integrity of the Bank of England," he added.
Awareness of claimsAwareness of claims
Mr Carney's appearance before the committee comes a week after it emerged that some officials were aware of market manipulation as early as 2006. Mr Carney's appearance before the committee comes a week after the release of minutes of meetings from 2006 suggesting that some officials were aware of market manipulation then.
The bank said there was no evidence its staff had colluded to rig the market. The minutes show that a senior member of the Bank of England's staff was told of "attempts to move the market" at a meeting with senior foreign exchange dealers from some of the world's largest banks.
But one member of staff has been suspended over compliance concerns. However, Paul Fisher, the Bank's executive director of markets who was head of its foreign exchange division until 2009, told MPs the minutes referred to traders' complaints over difficult markets, not rigging.
Carney told the committee the decision to suspend the person was taken by governors, and that "we hold staff to very high standards". "This is about traders whingeing about how difficult their life is and no one is going to have much sympathy for that," he said.
The minutes of meetings from 2006 were published last Wednesday following a Freedom of Information request. Mr Carney also said he had no information that anyone from the Bank condoned, facilitated or took part in market manipulation.
They show that a senior member of the Bank of England's staff was told of "attempts to move the market" at a meeting with senior foreign exchange dealers from some of the world's largest banks. "We can't come out of this with a shadow of doubt about the integrity of the Bank of England," he added.
Traders are alleged to have communicated with each other to agree the rate of exchange for foreign currency deals. One Bank of England member of staff has been suspended over compliance concerns.
It is thought some traders may have used online chat rooms to set a benchmark for currency trades. Mr Carney told the committee the decision to suspend the person was taken by governors, and that "we hold staff to very high standards".
Andrea Leadsom said that the minutes should have set off alarm bells.
However, Monetary Policy Committee member Paul Fisher, also appearing in front of the committee, said those minutes "did not convey to me that markets were being rigged".
"It isn't our job to go out hunting for rigging of markets," he adds.
'As bad as Libor''As bad as Libor'
The chairman of the Treasury Committee, Andrew Tyrie, said he remained to be convinced that the Bank was on top of the forex issue.
"This is the first real test for the Bank of England's new governance structures. Early signs are not encouraging," he said.
He added: "It has taken some time for the Bank's Oversight Committee to take the lead on accusations of misconduct relating to forex.
"The public needs confidence that the Bank's governance structures will ensure that it gets to the bottom of forex-related misconduct allegations. The public also needs confidence that any misconduct in other areas will be discovered."
Regulators have expressed concern that alleged forex manipulation could become the latest banking scandal.Regulators have expressed concern that alleged forex manipulation could become the latest banking scandal.
Traders are alleged to have colluded in setting certain key exchange rates in the foreign exchange market, resulting in big profits.
The head of the Financial Conduct Authority, Martin Wheatley, said last month that currency manipulation was "every bit as bad" as the Libor scandal, where banks including Barclays, Royal Bank of Scotland and UBS paid fines totalling $6bn relating to fixing inter-bank lending rates.The head of the Financial Conduct Authority, Martin Wheatley, said last month that currency manipulation was "every bit as bad" as the Libor scandal, where banks including Barclays, Royal Bank of Scotland and UBS paid fines totalling $6bn relating to fixing inter-bank lending rates.