Regulation  

Bank of England clears itself of FX wrongdoing

The Bank of England’s oversight committee has today (12 November) published an independent report by Lord Grabiner, which states that none of its officials was involved in any unlawful or improper behaviour in the foreign exchange market.

Publishing the results of the investigation into whether, between 2005 and 2013, any BOE official was involved in, or aware of, conduct issues in the FX market, was timed to coincide with the Financial Conduct Authority’s record fines for bank manipulation of the G10 spot markets.

A substantial part of the FCA’s investigation concerned FX traders sharing confidential information, including aggregated information about client orders, which was then used for improper behaviour. The BOE found no official was aware that this improper behaviour was happening.

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One official was aware that bank traders were sharing aggregated information about client orders for the purpose of ‘matching’ – a practice that is not necessarily improper, but can increase the potential for improper conduct – and was uncomfortable with the practice in that it could involve collusive behaviour and lead to market participants being disadvantaged.

“Notwithstanding those concerns, the bank official did not escalate the matter to an appropriate person,” the report stated. Back in March the BOE suspended an employee for such an indiscretion.

The report suggested that the employees conduct constituted an error in judgment that deserved criticism, but such criticism should be limited in that the individual was not acting in bad faith, nor was the individual involved in any unlawful or improper behaviour, nor aware of specific instances of such behaviour.

Mr Grabiner made three recommendations: to make changes to record management policy ensuring proper documentation of meetings; to give those working with FX markets continuing training in the non-investment products code; and to ensure clarity over systems and controls around the bank’s market intelligence role.

Anthony Habgood, chairman of court and oversight committee, added: “The committee strongly endorses these recommendations and court will oversee the executive’s implementation of them in a full and timely manner.”

peter.walker@ft.com