The Bank of England yesterday sacked the man tasked with being its eyes and ears in the foreign exchange markets, on the same day that banks were slammed and fined billions of pounds.
Veteran Bank employee Martin Mallett’s ousting was not connected with the affair, the Bank said. But in a report released yesterday by Lord Grabiner into how the Bank handled its monitoring of forex traders, it is made clear that at some key stages Mr Mallett was concerned about the behaviour of City bankers but did not refer his concerns further up the Bank.
In fact, it is due to Mr Mallett’s failure to communicate his concerns that Lord Grabiner found no Bank executives above him could be blamed for failing to act over the forex scandal.
In March 2012, Mr Mallett, whose job was to be in regular contact with forex market executives by phone and at regular meetings in expensive London restaurants and bank headquarters, said in a taped phone conversation to one that he would “feel uncomfortable justifying it to the regulator the way it’s currently set up”.
From at least 28 November 2012 Mr Mallett had been concerned about what he called in one conversation the “chattiness” of foreign exchange brokers from rival firms in City chatrooms, particularly in the run-up to the key fixing times when currency prices are set.
But he did not raise the issue with regulators or an “appropriate” person at the Bank of England.
The report says Mr Mallett does not believe he has done anything wrong, because he was not aware of misconduct and there was no “escalation policy” at the Bank for most of the period concerned.
But Lord Grabiner concludes: “I do not find this convincing. Once Mr Mallett had concluded that regulators might consider the practice improper, he should have raised the issue with an appropriate person … Mr Mallett had obtained relevant market intelligence but failed to distribute it.”
However, Lord Grabiner stresses Mr Mallett did not act in bad faith and was not involved in, or aware of, any unlawful or improper behaviour.
Even in October 2011, a trader told Mr Mallett he was worried forex teams were acting to “bully the fix” in the pound-dollar market – a term Lord Grabiner says could have meant move the price of the currency.
Mr Mallett says: “Well that’s market manipulation isn’t it?”
“Yep absolutely,” responds the trader.
On that occasion, Lord Grabiner says, Mr Mallett and a colleague who was listening to the call did not understand what the trader was claiming, so it was excusable they did not pass on their concerns.
The Bank said Mr Mallett was dismissed for “failure to adhere to the Bank’s internal policies.”Reuse content