Benchmark manipulation claims lead to internal investigation at BOE

As executives for buy-side financial institutions are well aware, benchmarks are specific standards that are used in order to gauge the performance of an investment. Some of the more common ones are represented in the stock market, but there are several others as well, all of which help with financial records management.

What’s important about these benchmarks is that they’re reliable, as those that aren’t can lead to problems with data governance. What’s especially troubling is if benchmarks are in any way manipulated through an impropriety. This is something that the Bank of England is looking into after allegations came to light that some of its officials condoned benchmark manipulation.

As numerous media outlets have reported, the BOE is looking internally to determine if sharing of information took place between traders in the foreign exchange market. The allegations suggest that in April, during a meeting, BOE officials gave traders the green light to manipulate foreign exchange rates.

Thus far, there has been no evidence to suggest this was condoned, Andrew Bailey, the central bank’s deputy governor, told the legislature in sworn testimony recently.

“On the evidence we have currently, we have no evidence to substantiate the claim that bank officials in any sense condoned or were informed of price manipulation or the sharing of confidential client information,” said Bailey. “We’ve released the minutes of that meeting, but obviously there are now allegations that there are different versions of what happened at that meeting.”

Investigation is ongoing
He added that while the meeting in question took place in April, the BOE first learned of the allegations in October. Since then, it’s been looking into the matter and a full investigation continues to be conducted until a definitive answer is determined.

The events surrounding this development have been compared to the London Interbank Offered Rate, or LIBOR, scandal. Martin Wheatley, who serves as chief executive for the Financial Conduct Authority, which is also looking into the matter, told the same committee recently that the allegations, if true, are “as bad” as what happened with LIBOR – the average interest rate banks in London are charged when borrowing from other banks. Financial institutions implicated have since been fined.

Whatever comes of this benchmark scandal, it reinforces the importance of business executives ensuring that they have the right data governance programs in place so that they can provide proof that their investment strategies are on the up and up should they ever need to be audited.

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