'No evidence' Bank of England knew about foreign exchange rate rigging

Bank fights back as Mark Carney plans new deputy governor role

The Bank of England hit back yesterday against claims that it had failed to act over manipulation of the $5.3 trillion (£3.2trn) a day foreign exchange market for up to eight years.

Paul Fisher, the Bank's director of markets, told the Treasury Select Committee that historic minutes released last week did not show evidence of rigging by currency dealers at banks on which the Bank should have acted.

Mr Fisher insisted that an apparent reference to rate manipulation in the July 2006 minutes of a meeting with traders merely referred to the frustrations of the forex dealers over market volatility. "Basically, it's a lot of traders whingeing about how difficult their life is, and no one is going to have much sympathy for that," he said.

The Governor of the Bank, Mark Carney, also told the committee that he had acted swiftly when the Bank was first directly implicated in the scandal on 16 October last year, saying he informed the Bank's supervisory Court of Directors on the very same day.

Some traders have alleged that the Bank tacitly approved the manipulation of the foreign exchange market – something that Threadneedle Street strenuously denies. But the Bank last week suspended an unnamed employee for failing to comply with internal procedures and revealed that the court has commissioned an independent report into the area.

Despite offering a robust defence of the Bank's conduct, Mr Carney also took the opportunity yesterday to announce a "root-and-branch review" of the Bank's market intelligence gathering operations, saying he would appoint a new deputy governor at Threadneedle Street whose prime responsibility would be banking and markets. "We have a £400bn-plus balance sheet and a series of issues that need to be addressed, and we will benefit from senior-most executive responsibility there," he said.

That means the total number of deputy governors at Threadneedle Street is set to rise to four, with the new official joining existing deputies who are responsible for monetary policy, financial policy and banking regulation. Further details of the institutional overhaul will be unveiled on 18 March.

More than 20 foreign exchange traders have so far been suspended or fired over the allegations of collusion between dealers and manipulation of currency rates.

Mr Carney insisted to the committee that the Bank would not tolerate any kind of financial market manipulation. "There appear to be individuals who have lost sight of what a market is – and that's unacceptable," he said. "They decided to cheat to make their lives easier. That is fundamentally against the principles of free markets and should be prosecuted to the fullest extent of the law."

Mr Fisher used to chair the Foreign Exchange Joint Standing Committee, which was a forum where Bank officials and traders could discuss market issues. Last week the Bank released the minutes detailing the meetings of a subcommittee of that forum. At one meeting in July 2006 traders discussed "evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix".

Andrew Tyrie, the head of the Treasury committee, said the Bank's new governance structures were facing their "first real test" in the shape of the forex inquiry and added that "early signs are not encouraging".

Earlier, Mr Carney told the committee that the Bank will never fully unwind its £375bn emergency programme to pump cash into the economy. At the beginning of his four and a half hour session, Mr Carney said the eventual sale of its gilt stocks would have an "impact" on debt markets, but he added: "We're not going to sell £375bn of gilts. That's a hypothetical question, purely hypothetical."

The Canadian added that the "world has changed" and the size of the Bank's balance sheet – swollen by the gilt purchases – would be "materially" larger going forward.

Mr Carney added that he did not expect the process of unwinding quantitative easing to begin until there had been "several adjustments" in interest rates – suggesting that it could take years.

He wants to have the flexibility to cut interest rates again should the economic recovery hit a sudden hurdle. It would be "more difficult" to adjust QE, but "interest rates are something we could move quickly".

Mr Carney said his personal view was that there was more slack in the labour market than the 1 per cent to 1.5 per cent view of the rate-setting Monetary Policy Committee.

MPC member Martin Weale, meanwhile, said the rapid slide in unemployment towards the Bank's current 7 per cent threshold for forward guidance had "reinforced" his doubts over the policy.

Q&A: Forex scandal

Q. What is the allegation

A. Investment banks are being investigated by regulators around the world for rigging currency markets. The Bank of England's Governor, Mark Carney, said yesterday that the issue was as serious as the Libor interest rate-rigging scandal.

Q. How would manipulation work?

A. Some $5.3 trillion (£3.2trn) of currencies are traded every day. And a key rate for that enormous market is the daily 4pm fix. The allegation is that currency dealers at large banks, who transact huge volumes of business on behalf of corporate clients, colluded to rig that benchmark rate by pooling information on large client orders. This collusion, it is claimed, enabled them to create profits for themselves.

Q. And what's this got to do with the Bank of England?

A. Some traders have alleged that the Bank was aware of what they were doing – and even encouraged it as a means of minimising market volatility. The Bank of England strenuously denies this and says an internal inquiry has, so far, uncovered no evidence to back it up. But the Bank did suspend one member of staff involved in foreign exchange last week for not following internal procedures. It is also setting up an external review of its conduct.

Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Arts and Entertainment
booksThe best children's books for this summer
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
ebookA unique anthology of reporting and analysis of a crucial period of history
Antoine Griezmann has started two of France’s four games so far
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary