Bank of England Suspends Employee Amid Currency Manipulation Inquiry

Lefteris Pitarakis/Associated Press

LONDON - The Bank of England said on Wednesday that it had suspended an employee as it conducts its own internal review into whether bank officials were informed of or condoned potential manipulation of the currency markets.

The suspension comes as regulators in Britain, the United States and other countries are conducting a series of investigations into whether traders colluded to manipulate foreign exchange benchmark rates.

The Bank of England has faced scrutiny in recent weeks over communications between its staff members and traders who were part of an industry committee that discussed issues affecting the currency markets.

Several traders who served on the committee are among more than a dozen traders who have been placed on leave or fired amid internal investigations at some of the world's largest banks, including Citigroup and UBS.

'The Bank of England does not condone any form of market manipulation in any context whatsoever,' the bank said in a statement. 'The bank has today reiterated its guidance to staff regarding management of records and escalation of important information.'

The central bank said it had conducted an 'extensive review' of documents, emails and other records and found no evidence that Bank of England staff members colluded in any way in manipulating the currency market or in sharing of confidential client information.

'The bank requires its staff to follow rigorous internal control processes and has today suspended a member of staff, pending investigation by the bank into compliance with those processes,' the bank said. The staff member was not identified.

The central bank said that it had examined about 15,000 emails, 21,000 chat room records and more than 40 hours of telephone call recordings as part of its internal review.

The Bank of England said on Wednesday that its oversight committee would lead an investigation to determine whether bank officials were involved in or knew about attempted or actual manipulation of the currency markets or any other improper behavior in the foreign exchange markets.

The law firm Travers Smith has been appointed as legal counsel to the committee and will prepare a report on the investigation. The report 'will be published in due course,' the central bank said.

'No decision has been taken on disciplinary action against any member of Bank staff,' the bank said.

Many of the world's largest banks, including JPMorgan Chase, Barclays and Royal Bank of Scotland, have acknowledged that they are facing inquiries from regulators into potential manipulation of the currency markets.

Deutsche Bank, the largest player in the currency trading market, with a share of about 15.2 percent, and Citigroup have both fired employees as they conduct their own investigations in the matter.

Neither the banks nor any of the traders who have been suspended or fired have been accused of wrongdoing.

In February, the New York State's Department of Financial Services became the latest regulator to join the investigation, requesting documents from a number of banks, including Credit Suisse, R.B.S. and Deutsche Bank, according to a person briefed on the matter.

The Department of Financial Services, headed by Benjamin M. Lawsky, is the first state regulator to scrutinize currency trading. Its jurisdiction covers any bank operating with a New York State charter.

Martin Wheatley, the chief executive of Britain's Financial Conduct Authority, has said that the currency manipulation allegations are 'every bit as bad as they have been with Libor,' referring to the London interbank offered rate. His agency is one of the regulators examining practices in the foreign exchange markets, which are lightly regulated.

The Bank of England was previously criticized for its response to complaints about potential manipulation of Libor.

The Financial Stability Board, a task force set up by the Group of 20 last year and headed by Mark Carney, the Bank of England governor, said in February that it would examine the process for how foreign exchange rates are calculated and analyze market practices surrounding those currency rates.

The task force has been working to ensure the transparency and reliability of global benchmark exchange rates following a series of scandals involving Libor and other rates.

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