Bank of England’s Carney faces grilling over forex scandal

Their long-standing frustrations with what they say is the Bank’s outdated governance system broke out again last week when the BoE suspended an official amid an internal review into whether Bank staff turned a blind eye to possible manipulation of key rates by foreign exchange traders.

The meetings at which the BoE and traders discussed possible problems in the market took place as far back as 2006, seven years before Carney’s arrival in London.

But lawmakers are angry that the Bank’s Court of Directors  — its governing board — only asked its oversight committee to investigate last week. Carney may also be asked to show how quickly he responded to the first signs of the case last year.

Mark Garnier, a member of the Treasury Committee which will hear Carney on Tuesday, said any perceptions that the BoE was not tough enough on tackling problems could damage London’s reputation as a financial center, potentially weakening Britain’s hand in European Union talks over financial reforms.

“We will be asking the governor what steps he is taking to bring management arrangements and committee structure up to the standards of the 21st century,” Andrew Love, another member of the Treasury Committee, said.

Former finance minister Alistair Darling said in 2011 that the governance arrangements were antiquated. “It is all to do with the governor being some sort of Sun King around which the Court revolves,” he said. The Court has since gained new oversight powers. But critics say it still lacks clout.

The Canadian has already made his mark on the BoE in ways beyond the forward guidance revamp of monetary policy. He has established a less hostile tone towards bankers than his predecessor Mervyn King and created the new post of chief operating officer to oversee an internal Bank shake-up.

Consultants McKinsey are working on ways to pursue that modernization drive and its findings are expected soon.
Lawmakers hope that on the list will be the BoE’s Court.