UK Treasury urges BoE to consider time stamps for forex trades

The Bank of England is being urged by the UK Treasury to consider requiring time stamps for all foreign exchange trades as part of reforms that proponents say would help prevent banks from defrauding clients, according to people familiar with the issue.

But the central bank has been tepid about the proposal, sparking questions about how exhaustive the BoE will be in its efforts to rehabilitate the City of London's tarnished reputation following several scandals.

Advocates for time stamps say such a rule would create an audit trail and help prohibit banks from cheating their clients by allowing them to see the forex rates offered at the time of transaction.

Time stamps are already widely used in wholesale forex markets but not in spot trades.

In a private meeting on forex reforms at the end of March, deputy BoE governor Minouche Shafik said complaints had not been raised about time stamps and seemingly brushed off the issue, according to people familiar with the issue.

Ms Shafik is leading the Bank's Fair and Effective Markets Review, which wants to increase financial transparency after a string of City scandals such as some banks' rigging of the Libor and foreign exchange benchmarks.

The BoE itself, however, has not emerged unscathed from the scandals. It played an embarrassing cameo role in the forex probe and was questioned on how much officials knew about the rigging of currency transactions and pricing. The bank has pledged to be more accountable under the governorship of Mark Carney.

"I recognise that market structure and transparency do play an important role in making markets fair and effective," said City minister Andrea Leadsom in a February 8 letter to Ms Shafik obtained by the Financial Times.

She added that she does not want to pre-judge the markets review, but she "would be grateful if in the context of this work you could ensure these concerns [about time stamps] are considered".

The BoE declined to comment.

"We can't have a BoE that's negligent and that doesn't enforce the responsibility of banks to know where their money is and how much they've got," said outgoing MP Austin Mitchell, who has been urging the bank to take up the issue for several years.

In a January 30 letter seen by the FT, Mr Carney told Mr Mitchell that as part of the markets review, the question of whether to require time stamps for spot forex trades had been raised. But Paul Fisher, executive director for markets at BoE, had also told him that time stamps are not a priority, according to Mr Mitchell.

He added that pension funds stand to be the most harmed by collusion between fund managers and traders to skim money off the top of trades - a behaviour that could be prevented with a time stamp requirement.

In a September 2014 report, the global Financial Stability Board recommended that asset managers include time stamps to ensure transparency in dealing rates during discretionary forex trades.

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