By Jamie McGeever
LONDON Jan 15 Bank of England representatives
discussed the process of setting foreign exchange benchmarks
with senior currency dealers at major investment banks in April
2012, more than a year before regulators launched official
probes into alleged rate manipulation, according to a Freedom of
Information Request made by Reuters.
The investigations into alleged currency market rigging
intensified on Wednesday as U.S. regulators descended on
Citigroup's London offices and Deutsche Bank suspended several
traders in New York.
A Bank of England (BoE) response to the Freedom of
Information Request released on Wednesday said: "There was a
brief discussion on extra levels of compliance that many bank
trading desks were subject to when managing client risks around
the main set piece benchmark fixings".
This discussion took place at a meeting on April 23, 2012 of
the "chief dealers subgroup" of the London Foreign Exchange
Joint Standing Committee, which is run under the auspices of the
BoE and involves representatives from the major players in the
foreign exchange market.
This was 18 months before Britain's top financial watchdog,
the Financial Conduct Authority (FCA), confirmed it was
investigating alleged manipulation and the U.S. Department of
Justice said it was launching criminal investigations.
Regulators around the world are probing allegations of
manipulation in the $5.3 trillion-a-day market, by far the
world's biggest and largely unregulated.
The probe into the exchange of positioning and order flow
information between senior traders at major banks and
allegations of attempted manipulation has resulted in several
traders being put on leave, suspended or fired.
Sources told Reuters that traders raised questions about the
use of chatrooms by dealers at the meeting in April 2012 because
they were concerned about the growing regulatory storm
surrounding the London Interbank Offered Rate, known as "Libor",
where traders were accused of manipulating global benchmark
The Libor scandal has already cost banks $6.0 billion in
settlements and seen the first suspects brought to court.
The fact that issues which 18 months later were to become
the subject of global investigation were discussed with the BoE
raises questions about the nature of the relationship between
the BoE and the market, what the central bank understood then to
be common practice around the fixings and what concerns about
compliance it may have raised with market participants in 2012.
"It's extraordinary that the Bank (of England) could have
known about this for so long," said a source with knowledge of
Britain's top regulator, the Financial Conduct Authority,
was also aware of the issues in 2012, another source said.
The Bank of England and FCA declined to comment on
Wednesday, although the BoE previously said in a statement that
the record of the April meeting "does not show any discussion of
actual or alleged manipulation of FX benchmarks".
The BoE added in the same statement: "The Bank takes the
recent allegations of manipulation extremely seriously and,
through its market knowledge and intelligence gathering, is
supporting the FCA in its investigation, and will take all
necessary steps to address this important issue."
The key foreign exchange rates, WM/Reuters, are compiled
using data from Thomson Reuters and other providers, and are
calculated by WM, a unit of State Street Corp. Thomson Reuters
is the parent company of Reuters News, which is not involved in
the fixing process.
The WM/Reuters rate set at 4 p.m. London time is considered
the benchmark by many companies and investors because of the
large amount of foreign exchange trading which is done in