UK legislator says Bank of England FX probe was too soft

[LONDON] A Bank of England probe into what central bank staff knew of malpractice in London's foreign exchange market failed to scrutinise officials closely enough and was "seriously incomplete", a senior lawmaker said on Tuesday.

Last year, the BoE's supervisory board commissioned an investigation by a top commercial lawyer, Anthony Grabiner, to look into what BoE staff knew about foreign exchange market malpractice.

The investigation found that the BoE's chief foreign exchange dealer had failed to escalate concerns that traders at other banks could be manipulating parts of the US$5-trillion-a-day global market, which is centred in London. But it also said the dealer did not act in bad faith.

On Tuesday, Conservative legislator Jesse Norman, a member of a parliamentary committee which scrutinises the BoE, said the terms of Mr Grabiner's probe had not held staff to a sufficiently high standard.

"The Bank of England adopted and set in its terms of reference very low tests for its inquiry into the foreign exchange fixing scandal," he said on his website.

"The inquiry is seriously incomplete, and has failed to address the broader issues which the Chairman of the Bank's Court of Directors...agreed required investigation."

Mr Norman, who has already had testy public exchanges with Grabiner, said he based his views on a legal opinion he had commissioned from another senior lawyer.

"It appears that the Bank, according to this opinion, did not even meet normal professional standards ... let alone the higher standards of professional conduct to which it aspires," Mr Norman told BBC radio.

The British parliament's Treasury Committee is due to question BoE Governor Mark Carney and Anthony Habgood, the chairman of the BoE supervisory board known as its Court of Directors at 1000 GMT.

The BoE said it had no immediate comment on Mr Norman's concerns, and that Mr Carney and Mr Habgood would address them.

Six major banks were fined more than US$4 billion for their role in the foreign exchange scandal last year.


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