Bank of England Shaken By Rigging Allegations

Bank of England Governor Mark Carney has said that allegations of manipulation in the £3trillion a day foreign exchange market could prove to be a bigger scandal than the Libor rate rigging fiasco.

During a five-hour grilling by the Treasury Select Committee yesterday, Carney said that the bank was “ruthlessly and relentlessly” investigating the claims of manipulation, which has already seen the suspension of one member of staff from the bank.

Carney told MPs that it would create a new deputy governor position, with responsibility for markets and banking. That person would carry out "a root and branch review" of how the Bank conducts market intelligence.

Carney is quoted by the BBC:

"This is as serious as Libor if not more so because this goes to the heart of integrity of markets and we have to establish the integrity of markets."

He said the bank had no warning of the alleged manipulation before October.

Within 48 hours of hearing the allegations, the Bank had called in law firm Travis Smith to conduct an independent investigation. 

The chairman of the Treasury Committee, Andrew Tyrie, remains somewhat unconvinced:

"This is the first real test for the Bank of England's new governance structures. Early signs are not encouraging.

It has taken some time for the Bank's Oversight Committee to take the lead on accusations of misconduct relating to forex.

The public needs confidence that the Bank's governance structures will ensure that it gets to the bottom of forex-related misconduct allegations. The public also needs confidence that any misconduct in other areas will be discovered."

It is bad enough that "ordinary" banks rigged the system. However, for there to be reasonable suspicion that the Bank of England also was involved in such rigging is a hammer blow that may well do untold damage to Britain's standing in the financial world and the ability of the City to maintain its position as the "go to centre" for global finance.