Bank of England's Carney faces grilling over foreign exchange scandal

Sun Mar 9, 2014 8:12am EDT
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By William Schomberg and William James

LONDON (Reuters) - Mark Carney faces probably his toughest questioning so far as Bank of England governor next week when lawmakers will seize on a foreign exchange scandal to press their demands for tighter oversight of the central bank.

Carney arrived from Canada last July as an outsider with a mandate to shake up the 320 year-old institution, from monetary policy to its relationship with the powerful banks of the City of London.

A group of influential members of parliament wants Carney to change the way the BoE polices itself too.

Their long-standing frustrations with what they say is the Bank's outdated governance system broke out again last week when the BoE suspended an official amid an internal review into whether Bank staff turned a blind eye to possible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.   Continued...

Mark Carney, governor of the Bank of England speaks during the Bundesbank Banking Congress "Symposium on Financial Stability and the Role of Central Banks" in Frankfurt, February 28, 2014. REUTERS/Ralph Orlowski