March 24, 2023
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Op/ed: It’s time to throw the book at currency bid riggers


By Mark Gilbert

The currency-rigging scandal that saw five banks fined $3.3 billion on Nov. 12 has also prompted the Bank of England to dismiss its chief trader in the market.

His departure is further evidence of the culture of collusion that’s infected the world of finance and is unlikely to change until more people are prosecuted for wrongdoing.

Here’s what happened. At 4 p.m. in London each day, benchmark exchange rates were (and still are) fixed to set, for example, how many dollars could be bought for a euro. Transactions worth billions of dollars, pounds, euros and other currencies were then settled using those rates. And the banks, true to form, conspired to manipulate the benchmarks to make money at the expense of their customers.

So at the same time mind-boggling amounts of taxpayers’ money were being spent to keep the global banking system afloat, bankers were scheming to manipulate currencies, interest rates in the Libor market, and just about every other financial benchmark reliant on the integrity of market makers for veracity. You can’t legislate for personal responsibility, but you should punish the bad consequences of its absence.

It turns out that Martin Mallet, the Bank of England’s chief currency trader, was told at least six years ago that the $5 trillion dollars per day currency market was corrupt, and did nothing about it. It’s a sorry state of affairs when even a central banker can’t seem to tell the difference between right and wrong.

Mallett headed a committee that met regularly with foreign exchange traders, where concerns were raised about the daily fix starting in 2008. The central bank’s probe into what its staff knew of the scandal, published today, reproduces e-mail exchanges among bank traders in electronic chat rooms at the time.

Mallett was “worried about open discussions banks have” about the fix, and “showed a little concern with banks openly chatting to each other” about customer orders they were lining up ahead of the fix, the transcripts show. Mallett said in a July 2008 e-mail that banks were “huddling” in chat rooms “to pre-match some of their exposures.” In 2012, Mallett referred to the information sharing as “that sort of shadowy darky murky area,” which raised the issue of “anti-competition and all this kinda stuff.”

The Bank of England says Mallett, suspended in March, was fired yesterday for failing to raise the issue with his superiors, not for turning a blind eye to market manipulation. That’s hogwash; my taxes paid his salary, and part of his function as a public servant was to help ensure the integrity of the banking system on which we all depend for the smooth functioning of society. He failed.

No matter how the central bank dresses up his departure, it’s a reminder that financial malfeasance is the result of individuals failing to do the right thing. Fining institutions makes great headlines, but those billion-dollar penalties punish shareholders, not the wrongdoers, and won’t change the culture of banking.

Leslie Caldwell, head of the U.S. Justice Department’s criminal division, acknowledged in September that holding individuals to account is the best remedy for this kind of criminal deception: “Certainly, there are cases where you also want to prosecute the company. But I think you get the best outcome — really across the board in terms of deterrence, in terms of the message to the public — when you prosecute individuals.”

 • Gilbert writes for Bloomberg View. Reach him at