The BOE Governor will testify before the UK Parliment's Treasury Committee tomorrow to defend the BOE in the wake of meeting minutes showing that there was knowledge within the BOE as early as 2006 of unusual trading around the 4PM London fix for foreign currencies. At this point the BOE says that it is unaware of any collusion between traders and BOE staff, however, there are many questions regarding specifically what the BOE was told and why this information was not passed up the chain of command.
Assuming that lack of collusion holds up under internal BOE investigation, the most likely explanation of why no action was taken may have to do with the age old problem of coziness between the regulator and the regulated. Examples have repeatedly come to light among utilities (gas, electric and pipelines), banks, insurance companies and when closely regulated in the US many years ago, the trucking and airline industries.
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