FleeceBook: Meet Michael Cross, Head Of FX And "Market Intelligence" At The Bank Of England
Last week we introduced our readers to the BIS' Head of Foreign Exchange and Gold, Benoit Gilson. As this week's induction into the FleeceBook hall of fame of faceless individuals behind the scenes whose fingers are on all the relevant buttons, we present to you Michael Cross, Head of Foreign Exchange, and Executive Director for Markets, at the Bank of England, a role which with the arrival of the BoE's new Goldman leader will become quite crucial in the coming weeks as the race to debase finally crosses the English Channel and it is cable's turn to crash and burn against all other currencies.
A quick look at Mr. Cross's bio courtesy of FX Week:
After graduating from Cambridge University with a PhD in History, Michael Cross joined the Bank of England in 1990. His first job was in clearing and settlement policy in the equity and futures market, followed by two years working in the supervision of discount houses.
In the mid-1990s, Cross returned to Cambridge to complete an MPhil in Economics before returning to the Bank of England to work in the sterling markets division under Paul Tucker, now deputy governor for financial stability, and the internal favourite to succeed Sir Mervyn King as governor next year.
In 1997, Cross was seconded to the International Monetary Fund as personal assistant to managing directors Michel Camdessus and Hoerst Kohler. He returned to the Bank of England in 2000 to work in the monetary analysis division as a senior manager.
In 2003, Cross moved to the markets division of the bank, initially as chief reserves manager and head of market intelligence, reporting to Paul Fisher, then head of the FX division.
In 2007, he was promoted to head up the sterling markets division, while retaining the market intelligence role. He succeeded Paul Fisher as head of FX in 2009, when Fisher was promoted to executive director for markets.
Based in London, Cross continues to report to Fisher and is also a member of the markets committee of the Bank for International Settlements.
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Some more on his day to day responsibilities:
While chairing the FX Joint Standing Committee is the role that brings Michael Cross into most regular contact with the upper echelons of the FX market, it is only a very small part of his day-to-day responsibilities as head of foreign exchange and reserves management at the Bank of England.
The job involves two main functions. Firstly, Cross is responsible for managing the bank’s FX desk, which is staffed by six traders and chief dealer Martin Mallett. The desk’s primary function is to carry out FX hedging through spot and forward contracts, mainly on behalf of UK government departments. The desk also runs a foreign currency deposit business for other central banks.
The second part of the role is to head up the reserves management function, which is staffed by a team of around 14. The Bank of England’s own FX reserves total roughly $6 billion, held in G-3 government bonds and kept in case the monetary policy committee (MPC) should ever decide to intervene in the FX market, which it never has to-date. Since 1992, intervention has only ever taken place in concert with other central banks, as in March 2011 when G-7 central banks stepped in to stem the acute appreciation of the yen following the Japanese earthquake and tsunami.
A far larger pool of FX reserves – now totalling around $100 billion – is held by the Bank of England on behalf of the UK government. Up until 2010, that figure had been closer to $60 billion, but the coalition government that came to power that year decided to increase the size of the reserves, in part as a means of funding a likely increase in contributions to the International Monetary Fund as the Greek debt crisis was in its early stages.
“The process of building up the government’s reserves over the past two years has been fairly straightforward as we invest in the most liquid government bonds denominated in G-3 currencies. The build-up has been funded out of gilt issuance, and for the most part the government likes to hedge reserve assets back to sterling. So we have been buying bonds on a currency swapped basis and we’ve discovered we are one of the bigger participants in the sterling cross-currency basis market, which has presented some issues in terms of counterparty management and selection,” says Cross.
On top of his FX and reserves responsibilities, Cross also has a major internal policy role, having had oversight for the bank’s market intelligence function ever since it was conceived in 2003 under the initiative of Paul Tucker, then executive director for markets. While he was still chief reserves manager in 2003, Cross was appointed as the bank’s first head of market intelligence in addition to his day job.
The market intelligence function today covers 23 separate markets and products, each monitored closely by a manager and several analysts. When Cross became head of the FX division in 2009, he relinquished the market intelligence role but the head of market intelligence, currently Jonathan Rand, continues to report to him. For Cross, the responsibility includes general oversight and regular presentations to both the MPC and the new Financial Policy Committee that will come into effect next year.
“The market intelligence function came about because Paul Tucker realised that a modern central bank in a major financial centre needs to know about every market, not just the ones it operates in, so he and I set up a system that aims to cover all asset classes and types of intermediary and end investor. It was massively ambitious, but it does mean we know something about everything rather than a lot about not very much,” Cross explains.
Read more on Mr. Cross here
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Finally, for some fun weekend reading, here is Mr. Cross with his thoughts on the role of the Bank of England in the gold market. Oddly enough, no mention of Libor anywhere.
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