Bank of England insists no warning of market manipulation

The Bank of England insisted it had no warning of alleged manipulation of foreign exchange markets before last October, even as its governor promised a "root and branch review" of its market intelligence arm.

Paul Fisher, the executive director of markets who was head of the bank's foreign exchange division until 2009, told a parliamentary hearing minutes released last week did not prove Bank officials had been told about evidence of rate-rigging eight years ago.

He said the minutes of an industry committee meeting in 2006 chaired by a BoE official showed concern by dealers over hedge funds moving currency rates around through large transactions.

“This is about traders whinging about how difficult their life is and no one is going to have much sympathy for that,” Mr Fisher said at a hearing of the UK parliament’s influential Treasury select committee (TSC).

Criticised
The bank has been criticised for not acting after it emerged last week that, at a meeting of the chief dealers' subgroup in July 2006, traders discussed "evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix". The issue is seen as a test for Mark Carney's leadership of the bank less than a year after he became governor.

'Root and branch review'
Mr Carney announced

yesterday the bank would create a fourth deputy governor position with prime responsibility for financial markets and banking. He said this would coincide with a “root and branch” review of the bank’s efforts to gather market intelligence from traders and other participants.

He also gave a strongest hint yet of a likely regulation of the so-far guideline-based foreign exchange markets, the largest in the world.

He said that, together with the Treasury and the Financial Conduct Authority (FCA), the BoE would consider "if there are regulatory changes to this market that are warranted".

Regulators around the world including the FCA are looking into allegations that traders have shared information about client orders and manipulated key forex benchmarks. The sprawling investigation has so far prompted the suspension or firing of 25 traders across 11 banks and the Bank of England.

– Copyright The Financial Times Limited 2014