BOE Chief FX Dealer Fired as Probe Faults Non-Escalation

The Bank of England fired its chief currency dealer a day before he was faulted in an independent investigation for failing to alert his superiors that traders were sharing information about client orders.

Martin Mallett was dismissed by the Bank of England yesterday for “serious misconduct relating to failure to adhere to the Bank’s internal policies,” according to a statement by the central bank today.

Mallett, who worked at the bank for almost 30 years, had concerns from as early as November 2012 that conversations between traders right before benchmarks were set could lead to the rigging of those rates, according a report today by Anthony Grabiner, who was commissioned by the central bank to look into what its officials knew about practices under investigation around the world. Mallett was “uncomfortable” with the traders’ practices, yet he didn’t escalate these concerns, Grabiner said.

“We’re disappointed because we hold ourselves to the highest standards -- we have an outstanding markets division,” BOE Governor Mark Carney said at a briefing in London today. “What Lord Grabiner found was that our chief dealer was aware of circumstances in the market that could facilitate or lead to improper behavior by market participants.”

‘Collusive Behavior’

In his report, Grabiner called it an “error of judgement.” Mallett was aware of a market practice “which he thought could involve collusive behavior and lead to market participants being disadvantaged and he failed to raise this with the appropriate people,” he said.

Mallett didn’t immediately respond to e-mails and phone calls seeking comment. His dismissal was the result of a separate internal disciplinary process unrelated to foreign exchange, not Grabiner’s investigation, according to the BOE statement.

U.S., U.K. and Swiss regulators ordered five banks to pay about $3.3 billion today to settle probes into the manipulation of foreign-exchange rates. The settlements are the first since investigations began last year. They’ve expanded to include whether traders used confidential information to take bets on unauthorized personal accounts, and whether sales desks charged clients excessive commissions in the $5.3 trillion-a-day market.

As the central bank’s chief dealer, Mallett would regularly meet with senior currency traders from the biggest banks to discuss developments in the industry. The meetings of the central bank’s Foreign Exchange Joint Standing Committee took place about every two months in restaurants and bank headquarters around London, minutes released by the Bank of England show.

Mallett “was not acting in bad faith,” according to the Grabiner report. He wasn’t “involved in any unlawful or improper behavior, nor aware of specific instances of such behavior,” it said.

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