By Jamie McGeever
LONDON, March 5 The Bank of England revealed on
Wednesday that allegations of rigging of world currency markets
had been flagged as far back as mid-2006 as it suspended a staff
member as part of a probe into what it knew about the alleged
The so-called fixings that are at the centre of a global
investigation into allegations of manipulation by traders are
used to price trillions of dollars worth of investments and
deals and relied upon by companies, investors and central banks.
What the British central bank knew about practices in its
role monitoring the largely unregulated $5.3 trillion-a-day
currency market has become a focus of a probe into alleged
collusion between dealers at some of the world's biggest banks.
Wednesday's suspension and the revelations about previous
warnings of possible manipulation attempts of the "London fix"
prompted British lawmaker Andrew Tyrie to say that Bank of
England Governor Mark Carney and other officials from the
central bank will face questions next week about the BoE's probe
when they make a scheduled appearance before the UK parliament's
influential Treasury Committee.
Tyrie said in a statement that the Bank's oversight body
should have been involved earlier.
Regulators have said the alleged foreign exchange
manipulation is as bad as the Libor interest rate rigging, which
has resulted in banks shelling out $6 billion in fines and
settlements and criminal cases against some individuals.
A BoE internal review had so far found no evidence that its
staff colluded in any manipulation or shared confidential client
information, the central bank said.
"However, 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," it said in a statement.
"The Bank has today re-iterated its guidance to staff
regarding management of records and escalation of important
information," it added.
A bank spokesperson declined to comment on the identity of
the individual or give further details about the suspension.
The Bank said its oversight body will lead an investigation
into whether BoE officials were involved in manipulation of
benchmark foreign exchange fixings or were aware of the
potential for such manipulation, and whether they were involved
in or aware of sharing confidential client information.
Minutes of meetings between chief currency dealers in London
and BoE officials - the Foreign Exchange Joint Standing
Committee's chief dealers subgroup (CDSG), which was set up in
2005 to discuss industry affairs - say allegations of possible
manipulation of fixings were first raised in July 2006, nearly
seven years before concerns became public.
"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," the minutes, released by the
BoE in response to a Freedom of Information request by Reuters
last month, say.
"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 of the meeting on July 4, 2006, said.
Later BoE minutes showed that the regular CDSG meetings were
discontinued in February 2013, shortly before media reports of
the allegations first surfaced.
At the centre of the probe involving Britain's Financial
Conduct Authority (FCA) and the U.S. Department of Justice are
allegations that senior traders shared market-sensitive
information relevant for the London fix, which is set at 4 p.m.
London time, using actual trades. London is the hub of the
global currency market, accounting for some 40 percent of the
trillions of dollars traded on an average day.
The key benchmark, known as the WM/Reuters fix, relates to
several exchange rates, including the euro, sterling, Swiss
franc and yen. They are compiled using data from Thomson Reuters
and other providers, and are calculated by WM, a unit
of State Street Corp.
"WM Company, a unit of State Street Corp, is the
administrator for the WM/Reuters Service. Through an agreement,
Thomson Reuters is a primary source of rates to WM from which WM
applies its methodology and calculates the benchmark. Thomson
Reuters is one of the various distributors of the rate," Thomson
Reuters said in a statement on Wednesday.
Thomson Reuters is the parent company of Reuters News, which
is not involved in the fixing process.
The CDSG, which the minutes show held several of its
meetings in smart restaurants around London's financial
district, last convened in February 2013, even though a meeting
had been scheduled for the following July. Media reports of
allegations of FX market manipulation first surfaced in June.
A Bank spokesperson was unable to say why the meetings with
chief dealers had stopped or at whose behest.
The Bank's internal review began in October last year and
has to date examined around 15,000 emails, 21,000 chat-room
records and more than 40 hours of telephone call recordings.
Britain's FCA and the Justice Department investigations also
formally opened in October. They are among regulators around the
world looking into possible wrongdoing in the FX market.
More than 20 traders have been placed on leave, suspended or
fired by banks in recent months, including the chief dealers at
currency trading giants Citi, JP Morgan Chase,
Barclays and UBS.
"Alarm bells should be ringing when a central bank suspends
staff in connection with market rigging," said Simon Morris of
law firm CMS. "This is serious, because the whole basis of
regulation is based on trust and integrity."
Martin Wheatley, chief executive of Britain's FCA, said the
allegations are "every bit as bad" as those in the Libor