The Bank of England was under pressure on Friday night amid claims that officials gave tacit approval to practices at the heart of the escalating investigation into London’s foreign exchange market.
A senior currency trader has reportedly handed over notes from a meeting with officials from the central bank in April 2012, which are said to indicate that traders were told that sharing information about impending customer orders at other firms was not improper.
That practice is at the centre of a year-long inquiry by the Financial Conduct Authority (FCA), which is investigating whether traders colluded in attempts to manipulate prices during the flurry of trading ahead of daily exchange rate “fixes”. While results of what could become the next great banking scandal are not expected until next year, Martin Wheatley, the FCA’s chief executive, told MPs on the Treasury Select Committee this week that practices were “every bit as bad” as what came to light in the Libor interest rate-fixing scandal which has cost banks billions of pounds in fines.
The Bank has released its minutes of the same 2012 meeting but they say only that “there was a brief discussion on extra levels of compliance that many bank trading desks were subject to when managing client risks”.
According to Bloomberg, however, the trader’s note of the same meeting said attendees were told that there was not a policy on communication between traders and that banks should make their own rules.
That tallies with City accounts. If correct, it could leave the Bank of England in an awkward position. The Bank has already faced criticism for failing to act on the Libor scandal after US watchdogs raised concerns about the way Libor and other similar interest rates – used to price a huge range of financial transactions – were being set, although at that time the Bank had no responsibility for its oversight.
A spokesperson said on Friday: “The Bank of England has already released its record of the April 2012 CDSG meeting, and we are continuing to support the FCA in its investigations.”
The scandal further widened this week when the New York banking regulator Benjamin Lawsky sought documents from some of the biggest banks in the field, including Deutsche Bank, Goldman Sachs and Barclays.
Several traders have been suspended as a result of the investigation and bankers have privately told The Independent that the inquiry is “causing real concern to the industry”.
Andrew Tyrie, the chairman of the Treasury Select Committee, said: “Allegations that banks may have been rigging the forex market are extremely serious, particularly for firms but also for regulators who had been telling Parliament that banking standards were improving.”
Mr Tyrie called for “a fundamental reform” of the structure of variable pay, or bonuses. He said variable pay had “for too long incentivised people to do the wrong thing”.