The Bank of England has suspended one of its staff and hired lawyers to investigate whether its own officials were involved in trying to manipulate the foreign exchange markets.
The Bank has appointed law firm Travers Smith to investigate whether its staff were “involved in attempted or actual manipulation of the foreign exchange market” or whether they “colluded with market participants in relation to any such manipulation”.
The move is the first admission by regulators that the suspected forex market manipulation taking place in global banks could have had a helping hand by authorities — a revelation that could have major implications for any legal cases or fines brought against banks or traders.
Nine banks have already suspended staff in relation to the forex investigation, with seven global regulators – including the Bank itself – now involved in the probe.
The move comes after unconfirmed allegations emerged by traders who told Bloomberg that Bank of England officials had condoned the sharing of information about forex trades before the daily fix at which benchmark exchange rates are set.
The Bank initially played down the allegations, saying that it had “no evidence to substantiate the claim that Bank officials in any sense condoned or were informed or price manipulation or the sharing of confidential client information”.
It said today that it had still not found any evidence that it colluded with traders ,but had broadened its inquiry to include allegations of possible cooperation by its own staff. The suspension of a staff member was in relation to whether internal compliance procedures were followed, it said.
The Bank said: “This extensive review of documents, emails and other records has to date found no evidence that Bank of England staff colluded in any way in manipulating the foreign exchange market or in sharing confidential client information. 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.”
A bank spokesperson declined to comment on the identity of the individual or the reasons for the suspension.
The Bank also confirmed that regular meetings between chief currency dealers in London and Bank officials, which had been held since 2005, were discontinued in February 2013, shortly before media reports of the allegations first surfaced.
Minutes of all the meetings of the Foreign Exchange Joint Standing Committee’s chief dealers subgroup (CDSG), which was set up in 2005 to discuss industry affairs, say that possible manipulation of benchmark exchange rates were first raised in July 2006.
The Bank of England, the Financial Conduct Authority and the US Federal Reserve and Department of Justice are among regulators looking into possible wrongdoing in the $5.3 trillion-a-day FX market. More than 20 foreign exchange traders have been placed on leave, suspended or fired by banks in recent months.
Benchmark currency fixings are used to price trillions of dollars worth of investments and deals and relied upon by companies, investors and central banks.