Bank of England forex inquiry comes under DoJ pressure

The integrity of a Bank of England inquiry has been called into question by prosecutors in the US as they piece together what the central bank knew about traders' behaviour in the foreign-exchange market.

The Department of Justice has secretly requested an interview with a senior Royal Bank of Scotland forex trader previously questioned as part of the BoE's own investigation into whether any of its officials knew of or connived in manipulation of forex, one of the world's biggest financial markets. US prosecutors are concerned over the thoroughness of the BoE's report and the way its inquiry was handled, according to people familiar with the situation.

The DoJ request - made without informing the UK authorities - comes at a sensitive time for the bank. It is trying to recast its image as a more transparent and accountable institution, even as it has been drawn into an unprecedented criminal investigation by the UK Serious Fraud Office. The SFO is separately looking at the extent of any BoE officials' involvement in the alleged manipulation of money-market auctions at the onset of the financial crisis.

The BoE's earlier £3m forex inquiry, led by Lord Grabiner QC, a veteran City litigator, cleared bank officials of any wrongdoing but said an official - who has since been dismissed for unrelated matters - should have escalated concerns to superiors.

Questions have already been raised about the thoroughness of the forex report, with the parliamentary Treasury select committee this year raising concerns over whether the terms of the inquiry had been drawn too narrowly.

At the time Mark Carney, BoE governor, told the committee that the original Grabiner report was "thorough and comprehensive" and that the barrister had "free rein to investigate absolutely anything he needed to". The bank declined to comment further on Wednesday and the DoJ declined to comment.

The DoJ has asked to interview James Pearson, head of RBS's European forex trading, at the US embassy, according to people familiar with the situation. Mr Pearson is in an unusual position as he is not being investigated by the DoJ as part of its criminal probe. Part of that investigation is due to be settled imminently with five banks, including RBS, paying a total of $6bn in fines.

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Mr Pearson was one of a group of chief dealers who met regularly with bank officials to discuss the forex market. Just two traders, including Mr Pearson, who attended a crucial April 2012 meeting are still in their jobs after swingeing cuts taken by the banks under investigation.

Mr Pearson could not be reached for comment. He previously flagged concerns to the UK's Financial Conduct Authority watchdog that the BoE had been told of communication between traders around the time of currency fixes, according to people familiar with the situation.

Other traders are now under the scrutiny of criminal authorities. Key to their defence will be whether the Bank or any other authority was told about potential rigging in the market and whether it condoned it.

The FCA declined to comment.

There are varying accounts of what was discussed at the April 2012 meeting, which, unusually, was not minuted at the time. A record of the meeting made more than a year later noted a "brief discussion on extra levels of compliance that many bank trading desks were subject to when managing client risks around the main set piece benchmark fixings".

Lord Grabiner, who interviewed the attendees of the meeting as part of his inquiry, found that there was conflicting evidence as to whether competition law was discussed, and whether Martin Mallett, an ex-Bank official, "told the group he would not be minuting the conversation".

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