Mark Carney is to be interrogated by MPs because of the refusal by the Bank of England to talk about the forex-rigging affair their senior official is highly connected to. The latter was fired a day before an independent review was published, criticizing him for what he did.
A chief forex dealer of the Bank, Martin Mallett, was reportedly dismissed for severe misconduct that “isn’t connected to the affair in any way”. This sounds weird while six global banks are about to pay £3 billion fines for their attempts to manipulate foreign exchange benchmarks.
A report by Lord Grabiner that was published yesterday put Mr Mallett under critique. He didn’t raise suspicions on the strange behaviour within the forex market that processes about $5 trillion in one day. Still, Threadneedle Street said the fail of the chief forex dealer isn’t connected with this firing in any way.
The Bank only said that Mr Mallett violated some internal policies of the institution. They say no more reasoning it with the privacy of the Bank.
That failed to satisfy MPs, who have in the past been critical of the lack of transparency at the Bank and its failure to grapple with City wrongdoing.
Andrew Tyrie, chairman of the Treasury select committee and former chairman of the Parliamentary Banking Standards Commission, told The Times: “I will be raising this issue with the governor when he comes before the committee in less than a fortnight.” It is the second time the Bank has been caught up in trading scandals. In 2012 its deputy governor at the time, Sir Paul Tucker, was accused of turning a blind eye to the manipulation of Libor interest rates and being too close to Bob Diamond, the Barclays chief at the time. He denied any wrongdoing but left the Bank last year.
Mr Mallett, the Bank’s chief forex dealer, was dismissed 24 hours before the findings of the Grabiner investigation, which yesterday found him guilty of an error of judgment in failing to escalate his concerns. In emails and recorded phone conversations going back to 2006, Mr Mallett repeatedly discussed suspicions about the possibility of collusion and improper behaviour in the forex market, but never raised his concern with his bosses or outside conduct regulators.
“This was an error of judgment for which he should be criticised,” Lord Grabiner said, adding, however, that Mr Mallett had not acted in bad faith.
The Bank revealed that Mr Mallett had been dismissed only in response to media inquiries, with officials insisting the timing of his departure was just a coincidence. The evidence for Mr Mallett’s unspecified misconduct was unearthed as a result of a trawl of documents, emails, phone recordings and chat-room transcripts instigated at the start of the Grabiner investigation.
As chief forex dealer Mr Mallett had general responsibility for buying and selling foreign currency for all government departments and helping them to hedge forex exposures. His desk was responsible for managing Treasury reserves being deployed to support the pound. It also gathered market intelligence to help Bank policymakers.
As part of this role, Mr Mallett went to dinners with bank forex traders, opening him up to suggestions he may have become too close. Internal Bank policies include rules on not profiting from information acquired in the course of Bank duties and not accepting excessive gifts or hospitality.
Mr Mallett has continued to be paid since his suspension in March, but will not receive a payoff. A 28-year veteran of the Bank, he is likely to have accumulated a large final-salary pension, which he would not forfeit in this case.