Bank of England tackles forex scandal

published 13 March 2014

Bank of England boss Mark Carney is to revamp the organisation's structure amid fears that it could be implicated in a foreign-exchange-rate rigging scandal. Regulators worldwide are investigating whether investment banks profited by manipulating the $5.3 trillion global currency market.

Last week, the central bank announced that it had suspended a staff member and had launched an investigation into whether internal controls were broken, or manipulation had been overlooked. Now it will appoint a fourth deputy governor to head up its markets and banks operations and review its approach to "market intelligence".

Carney also said he had no plans to unwind the bank's quantitative easing programme until after interest rates have risen. "Any unwinding of QE should come after several adjustments to rates," he said. The bank bought £375bn of gilts with printed money, starting five years ago this month.

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What the commentators said

Rebuilding the stability of the banking system and the City's reputation is starting to look overwhelmingly complicated, said Alex Brummer in the Daily Mail. How Carney must wish for a return to the "status quo ante": before the crisis, the job of market supervision was removed from the Bank, allowing it to focus on inflation and interest rates.

What is becoming clear is that the bank will never unwind QE, said Ambrose Evans-Pritchard in The Daily Telegraph. The word any' tells us "all we need to know... quite right too". There was a "mantra that helicopter money requires a hoover afterwards to vacuum it up. But in a deflationary world there is no clear imperative to do so." The gilts can be left to gradually expire rather than be sold back: 20%-25% of the national debt has been "eliminated in all but name". Evans-Pritchard concedes, however, that although it currently seems unlikely, the expanded money supply could "come back to haunt us".

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.