Sacked Bank of England currency chief Martin Mallett sent "inappropriate language and attachments" in emails
It also revealed some rather embarrassing details over its dismissed currency chief Martin Mallett.
Lord Grabiner, a prominent barrister whose report cost £3 million to put together, cleared the central bank and its employees of "improper conduct" last year, but the BoE's Governor Mark Carney still had to face the Treasury Select Committee over what happened with Mallett.
He confirmed that Mallett conducted at least 20 examples of "misjudgements."
This also included "inappropriate language on multiple occasions and included inappropriate attachments on emails." On top of that, after a review of millions of incidences of correspondence across the phone, email and through chatrooms, the BoE found that Mallett had given his personal opinion over the central bank's policy.
Carney said these incidences violated the BoE's information technology and confidentiality policies and, in turn, some of the information could have been misconstrued by traders.
Mallett was fired for "serious misconduct" in November last year.
BoE's Carney and Chairman of the Court Anthony Habgood fought with the Treasury Select Committee today over its governance and structure and how it was deemed by Lord Grabiner to have failed to spot potential market manipulation activities.
Grabiner's key findings were (emphasis ours):
- No evidence to suggest that any Bank official was involved in any unlawful or improper behaviour in the FX market.
- A substantial part of the FCA's investigation concerns bank traders sharing confidential information, including aggregated information about their client orders, which was then used for improper behaviour. No [Bank of England] official was aware that this improper behaviour was happening.
- Since at least 16 May 2008, the BoE's chief FX dealer, Mallett, was aware that bank traders were sharing aggregated information about their client orders for the purposes of a practice known as "matching" and had concerns that regulators would take an interest in it. The practice is not itself improper but it can increase the potential for improper conduct.
In fact, Carney spent most of his time trying to highlight how the BoE is held to higher standards than what is admissable in the legal system.
"The bar is set very high. We are not asked about whether any bank official was aware of market manipulation, we're asked about whether we are aware of activities that have the potential for market manipulation," said Carney.
"We are judged by a higher standard than any legal standard."
According to the Bank of International Settlements, the global FX market £3.5 billion worth of FX swaps, forwards and options as well as spot transactions daily.
FX benchmark rates are published daily. While there are a number of these benchmarks, the two most commonly used are the WM/Reuters at 4 p.m. GMT (11 a.m. ET) and the ECB one at 1:15 p.m. GMT (8:15 a.m. ET).
Last year, Citi, HSBC, JPMorgan, the Royal Bank of Scotland (RBS) and UBS settled with US and UK authorities over the FX rigging scandal, while Barclays was notably left out of the joint settlement of £2.2 billion.