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Bank of England eyes regulation as it hits back over forex allegations

Bank of England governor Mark Carney says regulation could be needed for the foreign exchange markets in the wake of rate rigging allegations.

Speaking to the Treasury select committee today, Carney said he acted swiftly when he heard allegations that the Bank of England had condoned trader manipulation.

Last week, the Bank of England suspended a member of staff over allegations the individual allowed traders to manipulate the market.

TSC chair Andrew Tyrie has accused the Bank’s “Byzantine” structure of making it difficult to hold staff to account.

Carney first knew about the allegations last October but defended the subsequent secret investigation and redacted minutes of board meetings.

The FCA is conducting a thematic review of firms’ execution practices, including the way services are described to clients and arrangements for order execution and review. It expects to publish the results by the end of June.

Carney said the FCA and Bank would consider if ”regulatory changes” are needed in the foreign exchange market.

Bank of England executive director of markets Paul Fisher, who was head of foreign exchange at the Bank until 2009, launched a robust defence of the Bank’s role.

He said: “I have never come across specific allegations of people rigging the market until this news last year. The allegations are about the traders themselves. It would have been very odd to come to meetings with us and say ‘we are rigging the markets, what do you think?’ That’s not going to happen.

“This is about traders whingeing about how difficult their life is and we didn’t have much sympathy. Later, we got into more technical discussions about how the fixes are constructed. We brought the market and fix makers together so there was improved understanding.”

In July 2012, former deputy governor Paul Tucker was accused by Barclays chief executive Bob Diamond of condoning Libor rigging to calm financial markets during the crisis. The TSC report proved inconclusive over whether regulators had given their blessing over the alleged lowballing.

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