|
 The so-called fixings that are at the center 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 behavior," 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.
[to top of second column] |
At the center 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.
"ALARM BELLS"
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 scandal.
(Reporting by Jamie McGeever and William
Schomberg; editing by Alexander Smith, Mike Dolan, Larry King and
Sonya Hepinstall)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
