BOE Heard Traders’ Currency-Rigging Concerns Years Ago
Bank of England officials knew of concerns the foreign-exchange market was being manipulated as early as July 2006, more than seven years before regulators opened formal probes into alleged rate-rigging.
The BOE yesterday releasedminutes of central bank meetings with traders from some of the world’s biggest banks where they discussed concerns that currency benchmarks such as the WM/Reuters 4 p.m. London fix were being manipulated. The central bank suspended an employee amid an internal investigation into allegations its officials condoned rigging, according to a separate statement.
At a July 4, 2006, meeting led by BOE chief dealer Martin Mallett at Smiths of Smithfield, a celebrity-chef-owned restaurant in the City of London, attendees said there was “evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix,” according to the minutes. “‘Fixing business’ generally was becoming increasingly fraught due to this behavior.”
The notes raise questions about whether the BOE could have done more to stop practices at the heart of investigations by authorities around the world of allegations traders colluded to rig rates. Foreign-exchange benchmarks like WM/Reuters are used to compute the day-to-day value of holdings and by index providers. Even small movements can affect the value of what Morningstar Inc. estimates is around $3.6 trillion in funds. The minutes also show central bank officials had heard of the issues long before a 2012 meeting, which was reported by Bloomberg News last month and spurred criticism by lawmakers.