Mark Carney to face grilling by parliament on plans to modernise Bank

Mark Carney

Members of parliament will grill the Bank of England governor, Mark Carney, on Tuesday about his plans to modernise governance at the central bank in light of the escalating foreign exchange scandal.

Longstanding concerns about the state of Threadneedle Street's internal governance reached new heights last week when the bank suspended an official after allegations that it knew about, or condoned, manipulation of foreign exchange rates.

Carney and Paul Fisher, the Bank's executive director of markets, will give evidence to the Treasury select on Tuesdaycommittee Carney will be under pressure to explain to Andrew Tyrie, the committee's chairman, why it took the Bank so long to act after allegations in October against two of its officials.

Last week, Tyrie said the Bank needed "a board worthy of the name", adding that the revelations had exposed a "byzantine" governance structure.

Andrew Love, a committee member said: "We will be asking the governor what steps he is taking to bring management arrangements and committee structure up to the standards of the 21st century."

Last Wednesday, the Bank published minutes of meetings of the chief dealers' sub-group of its foreign exchange standing committee, dating from 2005 until last year when the group was closed.

On the same day the bank suspended one of its officers, without giving their name or the reason for the suspension, and announced that its oversight committee – made up of non executive members of its governing body – would launch an inquiry.

It was reported at the weekend that inquiry could involve the appointment of a senior independent figure to oversee the process, drawn from the judiciary, the City or academia.

The Bank declined to comment on the report. However, it has appointed the law firm Travers Smith to prepare a report for the oversight committee, which will be made public.

Mark Garnier, another Treasury committee member, told Reuters any perceptions that the Bank was not tough enough on tackling problems could damage London's reputation as a financial centre, potentially weakening Britain's hand in European Union talks over financial reforms.

The court of the Bank of England, the organisation's governing committee, was criticised as not fit for purpose by former chancellor Alistair Darling in 2011. "It is all to do with the governor being some sort of Sun King around which the Court revolves," said Darling.

Publication of minutes detailing conversations between Bank staff and foreign exchange dealers have placed the spotlight on Martin Mallett, its chief dealer, who chaired the group. For its first few years, meetings were held not in conference rooms but at the tables of top City restaurants including The Don and Smiths of Smithfield. The issue of fixing was first raised at a meeting in July 2006, when attempts to move the market around the time of daily benchmark fixings were flagged.

About 10 banks around the world have suspended or dismissed staff in relation to the growing forex scandal in recent weeks, and the Financial Conduct Authority is investigating the situation. John van Reenen, director of the Centre for Economic Performance at the London School of Economics, said he hoped Carney would push to improve transparency and internal supervision.

"He's not as respectful of venerable British institutions as many people are, and from time to time you want to take a cold, hard look at whether the existing set of institutions really is fit for purpose in a modern age," said van Reenen. "He seems to be a person who is prepared to make those kind of changes."

Powered by Guardian.co.ukThis article was written by Juliette Garside, for The Guardian on Sunday 9th March 2014 20.52 Europe/London

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