2014.03.0607:50:42UTC+00Bank Of England Perceive Traders’ Currency-Manipulation Issues Years Ago

Bank of England officials learn the issues regarding the foreign-exchange market was being manipulated as early as July 2006, more than seven years before regulators opened proper investigations into the so called rate-manipulation.

The BOE yesterday issued minutes of central bank meetings with traders from some of the world’s largest banks where they discussed issues that currency standards such as the WM/Reuters 4 p.m. London fix were being manipulated. The central bank suspended a worker amid an internal probe into accusations its officials condoned manipulating, according to a different statement.

At a July 4, 2006, assembly 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 cause some questions about whether the BOE could have done more to end the said actions at the heart of investigations by authorities around the world of accusations traders colluded to rig rates. Foreign-exchange standards like WM/Reuters are used to calculate the day-to-day worth of holdings and by index providers. Even small movements can affect the worth of what Morningstar Inc. projections is around $3.6 trillion in funds. The minutes also display central bank officials had heard of the problems long before a 2012 meeting, which was reported by Bloomberg News last month and triggered criticism by lawmakers.

Parliamentary Hearing

Governor Mark Carney will appear before the Treasury Select Committee next week to give clearings on the questions of lawmakers regarding the foreign-exchange probe and the central bank’s internal controls, according to a statement yesterday by Andrew Tyrie, chairman of the Parliamentary group.

“Alarm bells should be ringing when a central bank suspends staff in connection with market rigging,” says Simon Morris, a lawyer in CMS Cameron McKenna LLP’s London office.

Regulators are analyzing whether bank traders had a transaction with dealers at other companies and timed trades to influence standards and maximize earnings. Some exchanged data on instant-message groups with names such as “The Mafia,” “One Team, One Dream,” “The Cartel” and “The Bandits’ Club” Over 20 traders -- some of whom were part of the BOE group whose minutes were published yesterday -- have been put on leave, fired, or suspended by top currency-trading companies including Deutsche Bank AG, Citigroup Inc. (C), and Barclays Plc.

‘Rigorous Controls’

The Bank of England announced yesterday the investigation has found no evidence to date its workers were involved in colluding to do the hocus pocus on the foreign-exchange market. The BOE mandates staff “to follow rigorous internal control processes,” according to the statement. The person who wa suspended, that was not named, is being probed and “no decision has been taken on disciplinary action.”

The Foreign Exchange Joint Standing Committee Chief Dealers Sub Group was established in 2005 and brings together central bank officials with spot-currency traders. About three times a year, they would assemble to talk about the problems in the market. The minutes released yesterday chronicle meetings from its inception in 2005 through February 2013.

That was the last time the group met, and the central bank is now reviewing its future, according to a person with knowledge of the situation.

At a May 2008 meeting, a “large majority” of those present expressed “concern about the lack of transparency among some methodologies and the impacts in managing order flow and pricing liquidity at times of concentrated benchmarked interest such as the 4 p.m. London fix.”