Bank of England discussed currency rate-setting 18 months before probe

by Reuters
Thursday, 16 January 2014 19:54 GMT

By Jamie McGeever

LONDON, Jan 16 (Reuters) - The Bank of England discussed with top London currency dealers their process for setting foreign exchange rates more than a year before a global investigation into alleged manipulation, according to a document provided to Reuters by the bank.

The document, supplied in response to a freedom of information request for details of a meeting on April 23, 2012 of the chief dealers subgroup of the London Foreign Exchange Joint Standing Committee, said there was a brief discussion of "processes around fixes" - referring to the daily setting of benchmark exchange rates - and "extra levels of compliance".

Two sources with knowledge of the meeting said the traders told the BoE about online chatroom use in the run-up to the daily rate-setting. It was not clear how much detail of this the traders provided at the meeting.

The subgroup, set up for banks and brokers to discuss broad currency market issues, met at the London offices of French bank BNP Paribas.

The time lag between the start of the global probe and the BoE's meeting, at which sources told Reuters traders had disclosed they were exchanging information via chatrooms about client positions, raises questions about whether the central bank should have referred this to the regulators.

Britain's market watchdog, the Financial Conduct Authority, began enquiries in the first quarter of 2013, but did not formally open an investigation until October when the U.S. Department of Justice also launched an investigations into the largely unregulated $5.3 trillion-a-day market in October 2013.

A source close to the UK probe said the FCA only became aware of issues raised at the BoE's April 2012 meeting several months later.

Asked on Thursday whether it had followed up the discussion, a spokesperson for the BoE said: "I cannot add to what is stated in the record of the meeting."

The BoE also declined to give any specific details of what was discussed. The minutes of the meeting say only: "There was a brief discussion on extra levels of compliance that many bank trading desks were subject to when managing client risks around the main set piece benchmark fixings, eg WMR."

The key benchmark, known as the WM/Reuters or "London fix", relates to several exchange rates including the euro, sterling, Swiss franc and yen. They are compiled using data from Thomson Reuters and other providers, and are calculated by WM, a unit of State Street Corp.

Thomson Reuters is the parent company of Reuters News, which is not involved in the fixing process.

The WM/Reuters rate set at 4 p.m. London time is considered the benchmark by many because of the large amount of foreign exchange trading which is done in London.

In response to a previous enquiry from Reuters, the BoE said the record of the April 2012 meeting did not show "any discussion of actual or alleged manipulation of FX benchmarks".


Benchmark foreign exchange rates, often referred to as fixes, are used to price investments and deals and relied upon by companies, investors and central banks around the world.

Groups of senior currency traders are alleged to have shared on Bloomberg chatrooms with names like "The Cartel" and "The Bandits' Club" market-sensitive information surrounding the popular currency rate benchmarks known as "the London fix".

This has prompted a global investigation into allegations of market manipulation and resulted in the firing or suspension of several traders at major banks.

Britain's Treasury Select Committee could also decide to look into the role of the BoE, depending on the outcome of the investigation, a spokesperson for the parliamentary committee told Reuters.

Sources with knowledge of the BoE meeting say traders flagged the use of chatrooms because banks were reviewing their policies as a result of allegations that dealers had manipulated the global interest rates known as Libor. That scandal has so far cost banks $6 billion in settlements and seen the first suspects brought to court.

One of the dealers in attendance was Rohan Ramchandani, the head of European spot currency trading at Citigroup. He was fired by the bank last week, according to sources with knowledge of the matter. Citi declined to comment.

The BoE said James Pearson from Royal Bank of Scotland , Niall O'Riordan from UBS and BoE representatives Martin Mallet and James O'Connor were also present at the meeting. O'Riordan from UBS has since been suspended, according to a source with knowledge of the matter.

Citigroup, RBS and UBS declined to comment. None of the traders were available for comment, and a spokesperson for the BoE said its staff were unauthorised to talk to the press.

The investigations into alleged currency market rigging intensified this week as U.S. regulators descended on Citigroup's London offices and Deutsche Bank suspended "multiple" traders in New York.

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