Carney tells MPs of ‘misjudgments’

Bank of England governor Mark Carney has told MPs that an internal inquiry revealed a “series of misjudgments” by a senior member of staff, including the leaking of a confidential document and sending of inappropriate e-mails.

Mark Carney said an internal inquiry uncovered a series of misjudgements by Martin Mallett
Mark Carney said an internal inquiry uncovered a series of misjudgements by Martin Mallett
Mark Carney said an internal inquiry uncovered a series of misjudgements by Martin Mallett

Chief currency dealer Martin Mallett was sacked after being found to have made at least 20 such errors, following an investigation into what the Bank knew about the foreign exchange rate-rigging scandal, Carney said.

Mallett’s dismissal was announced in November on the same day that six banks were fined a total of £2.6 billion by regulators, including the UK’s Financial Conduct Authority (FCA) over the forex scandal.

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Carney said the internal inquiry – which was led by Lord Grabiner QC and trawled through e-mails and chatroom conversations – brought to light “information that could have brought the Bank’s public reputation into disrepute”.

Giving evidence to the Treasury select committee yesterday, Carney said: “We discovered a series of misjudgments that Mr Mallett had made unrelated to the Grabiner inquiry. There were at least 20 examples of this.”

These included violation of the Bank’s IT and confidentiality policies, as well as “sharing a confidential Bank document with market participants”.

Mallett was also said to have volunteered his personal opinion on Bank policy, though this was an area he was not privy to. There had also been “inappropriate language, inappropriate attachments to e-mails”.

Carney said that Mallett, who had been at Threadneedle Street for 14 years, was an employee “who had in other respects served the Bank well” but that it had been obliged to act.

Carney said: “I was disappointed because this is an individual who has made an immense contribution to the institution and his community.

“It’s over a long period of time. We went back eight years. It is what one discovers by reading every e-mail, every chat.”

The governor said none of the failings related to dishonesty.

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Asked if Mallett would have been sacked in any event as a result of Grabiner’s findings on forex, Carney said: “In my judgment, there are serious errors of judgment by Mr Mallett that are uncovered as a result of the Grabiner inquiry that would rise at least to the level serious misconduct, and if I were taking the decision – which I would not – I would in my opinion rise to the level of termination.”

Carney admitted the Bank had been damaged by the forex scandal, but said that it had responded in a timely fashion, adding: “The reputation has certainly taken a knock. This hasn’t been a pleasant experience.”

The governor said the Bank had acted on a series of recommendations made on changes to its internal processes.

Members of the Bank’s market intelligence staff had now passed on 50 instances of potential market abuse to their superiors, of which 42 had been passed on to the FCA.

While Carney said he was “pleased” that the process was working, he added: “I’d be disappointed if the run-rate of what is escalated continued at that high level. There is an element of backlog here.”

Grabiner’s report, published in November, reviewed almost 66,000 documents and 6,700 phone calls. It concluded there was no evidence that any Bank official was involved in any “unlawful or improper” behaviour in the forex market.

Alastair McCaig, market analyst at IG, said: “Regardless of the fact that the Bank of England has ultimately been cleared, its reputation has taken a beating.”