By Jamie McGeever
LONDON, March 5 (Reuters) - The Bank of England suspended astaff member on Wednesday as part of a probe into what it knewabout alleged manipulation of world currency markets andrevealed that rigging allegations had been flagged as far backas mid-2006.
The so-called fixings that are at the centre of a globalinvestigation into allegations of manipulation by traders areused to price trillions of dollars worth of investments anddeals and relied upon by companies, investors and central banks.
What the British central bank knew about practices in itsrole monitoring the largely unregulated $5.3 trillion-a-daycurrency market has become a focus of a probe into allegedcollusion between dealers at some of the world's biggest banks.
Regulators have said the alleged foreign exchangemanipulation is as bad as the Libor interest rate rigging, whichhas resulted in banks shelling out $6 billion in fines andsettlements and criminal cases being brought against someindividuals.
A BoE internal review had so far found no evidence that itsstaff colluded in any manipulation or shared confidential clientinformation, the central bank said on Wednesday.
"However, the Bank requires its staff to follow rigorousinternal control processes and has today suspended a member ofstaff, pending investigation by the Bank into compliance withthose processes," it said in a statement.
"The Bank has today re-iterated its guidance to staffregarding management of records and escalation of importantinformation," it added.
A bank spokesperson declined to comment on the identity ofthe individual or give further details about the suspension.
In a separate development, the BoE confirmed that regularmeetings between chief currency dealers in London and BoEofficials, which had been held since 2005, were discontinued inFebruary 2013, shortly before media reports of the allegationsfirst surfaced.
Minutes of all the meetings of the Foreign Exchange JointStanding Committee's chief dealers subgroup (CDSG), which wasset up in 2005 to discuss industry affairs, say allegations ofpossible manipulation of fixings were first raised in July 2006,nearly seven years before concerns became public.
"It was noted that there was evidence of attempts to movethe market around popular fixing times by players that had noparticular interest in that fix," the minutes, released by theBoE in response to a Freedom of Information request, say.
"This was not in the interest of customers if the market wasforced away from where it should be when the fixing snapshot wastaken. It was noted that 'fixing business' generally wasbecoming increasingly fraught due to this behaviour," theminutes of the meeting on July 4, 2006 said.
At the centre of the probe involving Britain's FinancialConduct Authority (FCA) and the U.S. Department of Justice areallegations that senior traders shared market-sensitiveinformation relevant for the London fix, which is set at 4 p.m.London time, using actual trades.
The key benchmark, known as the WM/Reuters fix, relates toseveral exchange rates, including the euro, sterling, Swissfranc and yen. They are compiled using data from Thomson Reutersand other providers, and are calculated by WM, a unit of StateStreet Corp.
Thomson Reuters is the parent company of ReutersNews, which is not involved in the fixing process.
London is the hub of the global currency market, accountingfor some 40 percent of the trillions of dollars traded on anaverage day.
"ALARM BELLS"
The CDSG, which the minutes show held several meetings inrestaurants around London's financial district, last convened inFebruary 2013, even though a meeting had been scheduled for thefollowing July. Media reports of allegations of FX marketmanipulation first surfaced in June. A Bank spokesperson wasunable to say why the meetings with chief dealers had stopped orat whose behest.
The Bank's internal review began in October last year andhas to date examined around 15,000 emails, 21,000 chat-roomrecords and more than 40 hours of telephone call recordings.
Britain's Financial Conduct Authority (FCA) and the U.S.Department of Justice also formally opened investigations inOctober last year. They are among regulators around the worldlooking into possible wrongdoing in the FX market.
More than 20 traders have been placed on leave, suspended orfired by banks in recent months, including the chief dealers atcurrency trading giants Citi, JP Morgan Chase,Barclays and UBS.
"Alarm bells should be ringing when a central bank suspendsstaff in connection with market rigging," said Simon Morris oflaw firm CMS. "This is serious, because the whole basis ofregulation is based on trust and integrity."
Martin Wheatley, chief executive of Britain's FCA, said theallegations are "every bit as bad" as those in the Liborscandal.
The Libor investigation is still ongoing but reached itszenith in mid-2012, when Barclays chief executive Bob Diamondresigned and then BoE deputy governor Paul Tucker gave testifiedin front of UK lawmakers.