Bank of England governor Mark Carney has said 50 cases of potential market abuse have been uncovered following the foreign exchange-rigging scandal that led to the Bank’s own chief currency dealer being fired last year.
The cases have come to light since March 2014 when the Bank launched an investigation into its own role in the scandal involving the manipulation of the £3.5tn-a-day foreign exchange markets.
On the day in November 2014 that banks were handed £2.6bn worth of fines, Martin Mallett, the chief currency dealer, also left the Bank of England. Carney revealed on Tuesday that Mallett was fired for “at least 20” professional breaches. Regulations have been introduced to make it easier for staff to raise concerns earlier.
Carney, who admitted to MPs that the Bank’s reputation had “taken a knock” in the forex scandal, said there had been 50 instances of staff at Threadneedle Street raising concerns about potential market impropriety.
The Bank has referred 42 of the 50 cases to the Financial Conduct Authority, Carney told the Treasury select committee. The cases are not restricted to currency markets.
Andrew Tyrie, chairman of the select committee, said the fact that so many instances had been identified was “concerning”, although Carney said he expected the number to diminish over time.
“I’d be disappointed if the run rate of what is escalated continued at that high level. I’m afraid to say there is an element of backlog here,” Carney said.
Giving evidence on the Bank’s review of its role in the forex scandal, the governor said Mallett was sacked for “a series of misjudgments” that came to light after a trawl through his emails and phone records going back eight years.
These included the use of inappropriate language, inappropriate attachments on emails, violations of the Bank’s IT policy, violations of confidentiality policies, sharing a Bank document externally, and venturing personal opinions about potential Bank policy.
“Issues that in the public domain could have brought the Bank’s reputation into disrepute,” Carney said. “It’s disappointing. This is an employee who in other respects had served the Bank well but with a senior officer at the Bank, with multiple misjudgments, [if] you have those facts in front of you, you have to act.”
Last March, the Bank appointed leading barrister Lord Grabiner to investigate allegations that some of its staff may have been involved in manipulating the foreign exchange markets. Grabiner cleared the Bank – and its staff – of improper behaviour, following a £3m investigation.
Grabiner concluded, however, that Mallett had made an “error of judgment” by not telling his superiors about his concerns that bank traders could be colluding to rig the market.
Carney maintained on Tuesday that Mallett was sacked not as a direct result of Grabiner’s conclusions, but because of information uncovered during the Bank’s own internal review.
The governor said that while the timing of the dismissal was “not ideal”, it was necessitated by events. He added that in his view, Grabiner’s findings in isolation would have been sufficient to justify his dismissal.
Asked if he could be sure that other senior members of the Bank had not made similar misjudgments, Carney said: “We have dedicated public servants at the Bank held to very high standards. I have every confidence in our employees. We don’t spy on our employees, we don’t monitor our employees.
“Through better policies, having the training and having the right culture, we will minimise those instances and uphold the integrity of the institution.”
Admitting the Bank’s reputation had been damaged, he said: “This hasn’t been a pleasant experience. I think the test of an organisation is how it responds to circumstances like this. We responded in my view in as timely a fashion as possible.”
Carney described the Bank’s shakeup of market intelligence gathering as “fairly radical”. The Bank is increasing the number of people dedicated full-time to market intelligence from 10 to 15. They will be supported by extra staff who spend some of their time on market intelligence.
“We don’t want individuals in certain seats for a very long period of time, you want people to move around, [partly] so they don’t develop an overly close relationship with participants in the market,” Carney added.
Carney and Anthony Habgood, chairman of the Bank’s Court, came under pressure to defend the scale of the Grabiner review, arguing that it was comprehensive.
Earlier the Bank had been criticised for failing to properly investigate its role in the rigging of foreign exchange markets.
In a report commissioned by Jesse Norman, the Conservative MP and a member of the select committee, a leading British barrister had said the Bank set very low tests for its inquiry into the scandal.
Charles Béar QC suggested the Bank-commissioned review was so narrow that it did not hold officials up to sufficient scrutiny.
Carney and Habgood rejected the suggestion.
This article was written by Angela Monaghan, for theguardian.com on Tuesday 3rd March 2015 19.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010