The Governor of the Bank of England is set to face tough questioning from the Treasury Select Committee next week after it emerged last night that senior officials were warned about manipulation of the $6.3trn (£3.8trn) a day foreign exchange market as long ago as 2006.
Details emerged as the Bank yesterday suspended an unnamed member of staff in connection with its inquiries into the affair and asked an oversight committee of the Court of Directors to investigate officials' roles and behaviour.
It also released the minutes of a series of meetings between its market experts and traders at upmarket City restaurants such as Smiths that reveal concerns about "attempts to move the market around popular fixing times" – when reference exchange rates are determined. This, they note, was causing "fixing business" to "becoming increasingly fraught".
The chair of the Treasury Select Committee, Andrew Tyrie, last night criticised the Bank of England for its tardy response to explosive claims that it knew about manipulation of the market.
"There is a strong case that the non-executives in the Bank should have taken the initiative on this from the moment the need for external assistance was considered," said Mr Tyrie. "Yet this issue does not appear to have been raised with Court or the Oversight Committee – the nearest the Bank has to a board – until December. Indeed, it appears to have taken the suspension of a Bank employee for the Oversight Committee to be fully engaged."
The Governor, Mark Carney, and other senior officials including the Bank's director of markets, Paul Fisher, will face questions on the subject before the committee next week.
The suspension of one of the Bank's own employees is likely to feed suspicions that within the central bank there was, at least, concerns over the integrity of the foreign exchange market.
Last December the Bank ordered an internal review into allegations that its officials "condoned or were informed of manipulation in the foreign exchange market or the sharing of confidential client information".
Traders have alleged that the Bank was told they regularly exchanged information on the size of their clients' orders before fixing exchange rates. They say they were told by Bank officials that there was nothing inappropriate in doing this. As well as involving the Court of Directors, the Bank has commissioned the law firm Travers Smith to prepare a report which will be made public.
The Bank stressed that it has not taken any decision to discipline any member of staff, and emphasised that it is working closely with the Financial Conduct Authority. "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," it said. It added that it had already examined 15,000 emails, 21,000 Bloomberg and Reuters chat-room records and more than 40 hours of telephone recordings.