A senior currency trader who served on the Bank of England’s foreign exchange committee has been suspended by his bank, dealing a further blow to London’s position as the world’s leading centre for forex trading.
The chief dealers’ group — a committee of senior forex traders and Bank officials — was thrust into the spotlight this week after the Bank responded to allegations that it had turned a blind eye to warnings that currency markets were being manipulated. The Bank released a cache of minutes from meetings of the group, which revealed that potential manipulation of the forex markets had first been discussed nearly eight years ago — long before the Bank decided to investigate.
Mr de Groot is the fourth member of the chief dealers’ group to have been suspended by their employer since allegations of currency fixing surfaced last year. In all, 29 traders have served on the chief dealers’ group since it was created in 2005, according to minutes of the group’s meetings.
Joseph Landes, a senior currency trader at Bank of America, has also been suspended, it emerged yesterday. Mr Landes did not serve on the chief dealers’ group.
Politicians and former central bankers warned that the forex scandal had put the Bank’s credibility at stake. A second regulatory failure after Libor rigging could raise questions about whether Britain is up to the job. “It does not help the reputation of the City if our regulators are off the ball,” Mark Garnier, a Tory MP on the Treasury Select Committee, said.
The Bank of England revealed on Wednesday that it had suspended one employee in connection with its investigation into forex manipulation. It has hired Travers Smith, a law firm, to compile a report on the matter.
The revelations prompted Andrew Tyrie, the chairman of the Treasury Select Committee, to announce on the same day that he would question Mark Carney, the Governor of the Bank, and other leading officials in connection with the allegations.
A spokesman for the committee said that it had no intention of calling Lord King of Lothbury, the former Governor of the Bank, to give evidence. However, the spokesman said that MPs would consider calling further witnesses once the Travers Smith report had been published.
One former top UK central banker said that the Bank had no option but take a “drains up” approach to the inquiry. With investigations into forex manipulation by regulators in the US and elsewhere, the “last thing the Bank can afford to happen is for its internal review to claim to have got to the bottom of it, only for regulators in New York to turn up one embarrassing new fact”, the former Bank official said.
The suspension of Mr de Groot, which was first reported by The Wall Street Journal, is the first known suspension by BNP linked to the forex investigations. BNP declined to comment and Mr de Groot did not answer his office phone yesterday. Mr Landes did not answer his office phone yesterday. Bank of America declined to comment.