FX Fixing Scandal: BoE Claims ‘No Evidence’ of Currency Manipulation for 8 Years
FX Fixing Scandal: BoE Claims ‘No Evidence’ of Currency Manipulation for 8 YearsReuters

Bank of England members have debunked claims the central bank knew about traders seeking to rig key foreign exchange rates for the past eight years.

Speaking at a Treasury Select Committee hearing, BoE's Paul Fisher said that there is "no evidence" of FX fixing despite allegations that the central bank new about allegations for years.

Fisher added that he has not even personally heard of currency rigging allegations until 2013 and would have told the regulator about it, if he had.

BoE governor Mark Carney added that "we first became aware ... a member of the bank first became aware of allegations related to (issues) we were discussing on the 16th of October, I was informed then, I informed the chair of court that day, we convened governors, we decided to launch an investigation within 48 hours we retained external council and they had begun a very thorough, systematic, relentless investigation."

"Best practice would appear, to discharge this type of rule, would be to have external expertise, not just legal expertise but an external person to run these types of reviews, and also to run the reviews of the bank's policy functions."

He added also reiterated that "this has taken a comprehensive, consistent, relentless approach to evidence, both obvious and not obvious."

Previously, IBTimes UK exclusively revealed that a whistleblower alerted regulators in the US, UK and Switzerland in 2011 about some of the world's largest trading companies and banks manipulating benchmark sterling, US dollar and Swiss franc currency rates.

However, it was not until 2013 that these authorities started investigating the allegations of market rigging.

BoE's Alleged FX Fixing Involvement

A few days ago, the BoE revealed that it suspended one official and confirmed that it stopped meeting a group of top London currency dealers last February following its internal review into allegations that it is involved in the foreign exchange fixing scandal.

In a statement, the BoE revealed that during its internal review into allegations that BoE officials condoned or were informed of manipulation in the FX market or the sharing of confidential client information, it suspended a member of staff, pending further investigation.

In a separate statement to IBTimes UK, a BoE spokesperson confirmed that the last meeting between central bank officials and the Foreign Exchange Joint Standing Committee's chief dealers subgroup (CDSG), took place in February 2013.

Rumours surfaced four months later.

The CDSG consists of London's top FX dealers and is usually chaired by the BoE's chief dealer Martin Mallett. These meetings have existed since 2005 up to four times a year.

At the beginning of this month, BoE officials were accused of giving currency traders the green light over the way they shared customer orders with counterparts at other firms, when they met the central bank's seniors in 2012.

According to documents handed over to the regulator, BoE officials condoned the trading practices, which have now become a central part of the global foreign exchange manipulation investigations.

In January, a Freedom of Information Act request revealed that Bank of England officials discussed the foreign exchange setting process with chief currency dealers a year before any investigations were launched.

According to the documents, the FX setting was discussed with senior traders at some of the world's largest investment banks in April 2012, despite US, UK and European regulators launching their probes a year later.

The FX Market

The daily $5tn (£3.1tn, €3.7tn) currency market is the largest in the financial system and is pegged to the value of funds, derivatives and financial products.

Morningstar estimates that $3.6tn in funds, including pension and savings accounts, track global indexes.

FX rates are calculated are compiled by using data from a variety of submitted provisions on a number of platforms, such as Thomson Reuters.

It is then calculated by WM, a unit of State Street, to form WM/Thomson Reuters at 1600 GMT daily.