The global investigation into the manipulation by large financial institutions of FX rates has been a long, drawn out affair which did not stop at the censuring of some of the world’s largest FX dealers by US, Swiss and British authorities.
Just over a year ago, Lord Grabiner was drafted in to head an investigation into the Bank of England’s practices in order to ascertain whether the central bank had been involved in manipulation.
Lord Grabiner has maintained relative silence thus far, however North American authorities have now begun to request results, and as a result, the US Department of Justice has begun its own investigation into the practices which were in place within the Bank of England.
The DoJ has requested to interview a senior employee at Royal Bank of Scotland (RBS), amid concerns that the Bank of England’s own report was not appropriately thorough, according to the Financial Times.
According to the Financial Times, the US authority is concerned about the way the inquiry was handled. Lord Grabiner, whose report largely cleared any Bank official of wrongdoing, has been criticised by MPs on the Treasury select committee for parts of his investigation, in particular whether he should have pressed the Bank’s former currency chief, Martin Mallett, about what he knew.
A particular point of interest with regard to this investigation is that as part of the Department of Justice’s long-running investigation into currency rigging, the employee in question, James Pearson, the Head of European FX Trading at RBS, is not under investigation from US authorities. He is, however, said to have been one of a number of senior traders to regularly spoke to Bank of England officials about the forex market.
The Grabiner report lay severe criticism upon Martin Mallett, the Bank of England’s former head of currency, mainly as a result of Mr. Mallett’s failure to escalate concerns relating to potential misconduct, however the report concluded that Mr. Mallett was not aware of any actual market manipulation.
Mr Mallett left the Bank last year, although governor Mark Carney said this was for unrelated reasons.
Lord Grabiner, a longstanding peer, charged £400,000 for the report, a substantial proportion of the total £3.5 million that it cost to complete. This is a significant amount, especially considering that the US law enforcement agencies are reopening the matter, thus displaying a lack of confidence in the findings.
Photograph of Lord Grabiner courtesy of the Telegraph.