It has come to light that the Bank of England (BoE) knew to some degree about manipulation in the foreign-exchange markets by the largest financial institutions in the world. Two BoE officials, including the central bank’s chief FX dealer, have been alleged to condone these unsavory practices, including order front-running to reduce risk, by traders that attended a meeting held in April 2012. The central bank admitted no wrong doing, but it has had its fair share of controversy.
BoE Governor Mark Carney will look to dissolve any tensions in the coming week as he will face questions from lawmakers who will fight for strict oversight of the forex markets. Carney, formerly of the Bank of Canada (BoC), has already made some strides in the way the 320 year-old bank has conducted monetary policy, yet lawmakers want more done in how the central bank does business.
“We will be asking the governor what steps he is taking to bring management arrangements and committee structure up to the standards of the 21st century,” said Andrew Love, member of the Treasury Committee. There is worry that if Carney cannot sway perceptions of the BoE, and shift away from outdated practices, that London will lose its image as one of the world’s largest financial centers.
An unnamed BoE official has been suspended, but the central bank holds firm that no manipulation was condoned. However, notes from a trader who attended the April 2012 meeting stated that the BoE officials asked that the contents of the meeting were not recorded and that sharing client orders and information with other institutions was not improper.
It may still be determined if the officials outright saying to actively manipulate exchange-rates or not, but turning a blind-eye to the situation is, in fact, condoning manipulation. Evidence suggests that the bank knew about these concerns years prior, and the central bank has already been seen to have known, years before it reached the surface, and done nothing about the LIBOR scandal. Mark Carney could have his hands full if the nearly four-century old institution is set in its ways.