Bank of England: Mark Carney faces grilling over forex probe

 

Bank of England governor Mark Carney is set to face a grilling by MPs over claims that some of its officials knew about the alleged practice of foreign exchange rate-fixing.

Mr Carney is due to appear before the Treasury Select Committee just days after the Bank suspended an employee over compliance concerns following an internal probe.

His deputy Andrew Bailey has already admitted that claims linking the Bank to the burgeoning forex scandal - which regulators say threatens to match the seriousness of Libor rate-rigging - could prove "enormously damaging".

Mr Carney is due to give evidence about the allegations during a marathon three-part session which will also see him questioned over the abandonment of his flagship "forward guidance" policy on interest rates as well as Scottish independence.

The Bank was dragged into the forex affair - which is being investigated by the Financial Conduct Authority (FCA) - after a Bloomberg report centring on a meeting between officials and bank traders in 2012.

It was claimed that at the meeting, the traders admitted to the practice of sharing information about customer orders before currency benchmarks are set - an alleged practice at the heart of an ongoing regulatory probe into market manipulation.

They were said to have been told that there was no policy on these communications and that banks should make their own rules.

Mr Bailey stressed during an appearance before MPs last month that the Bank did not condone any market manipulation and that it took the claims "very seriously".

Last week, it said it had found no evidence that its staff had been involved in forex manipulation, but revealed it had suspended a member of staff while it investigated compliance with internal control processes.

It has called in law firm Travers Smith to assist with its investigation into what its officials might have known about forex rigging or information-sharing in the market.

The Bank's internal review has so far covered around 15,000 emails, 21,000 Bloomberg and Reuters chat room records and more than 40 hours of telephone call recordings.

Regulators worldwide - including the FCA in Britain - are investigating a number of firms and their foreign exchange trading activities as part of a major probe of the £3 trillion a day forex market.

They are looking into whether currency traders shared information about their positions and knowledge of client orders through instant messages to rig the foreign exchange market in their favour.

FCA chief executive Martin Wheatley told MPs earlier this year that allegations surrounding forex trading were "every bit as bad" as the Libor rate-rigging scandal, which has cost banks billions in fines.

Mr Carney's three-part evidence session before the Treasury Select Committee will begin with a section on the Bank's Inflation Report last month.

The publication of the report saw policy makers abandon the forward guidance policy linking interest rates to unemployment after just six months, as the jobless rate had improved much more quickly than previously anticipated.

Mr Carney said at the time that the economic recovery was "neither balanced nor sustainable" and that rates would have to stay well below pre-recession levels of around 5 per cent for the next few years.

Deputy governor Charlie Bean said in his latest speech that this was likely to mean rates being at 2-3 per cent "for some while".

Martin Weale, another member of the Bank's Monetary Policy Committee, has said that they are likely to rise from their current rate of 0.5 per cent - where they have been since 2009 - in spring next year.

The evidence session will also address the "economics of currency unions" amid debate over the possible implications of a Scottish vote for independence.

Chancellor George Osborne has already ruled out a currency union between an independent Scotland and the rest of the UK.

First Minister Alex Salmond's Scottish Government wants to create a "sterling zone" with the rest of the UK if there is a Yes vote in the break-away referendum.

Mr Carney said in a speech in January that an effective currency union would force a newly-independent Scotland to hand over some national sovereignty in a similar way to how this is done in the eurozone.

"Any arrangement to retain sterling in an independent Scotland would need to be negotiated between the Westminster and Scottish parliaments," he said. "The Bank of England would implement whatever monetary arrangements were put in place."

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones