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Carney: Strategic shake-up at Bank of England

BoE bolsters oversight with new deputy governor: Carney

Mark Carney, the Governor of the Bank of England, pledged to appoint a new Deputy Governor at the Bank to lead a "root and branch" review of its strategy, after suspending an official over the foreign exchange market manipulation scandal.

Carney claimed that there was "no evidence" any Bank of England official had condoned manipulation of the foreign exchange market, as he faced down tough questioning from U.K. members of parliament (MPs).

He defended the Bank against MPs' suggestions it should have been more alert to the possibility of foreign exchange market manipulations, after the matter was raised as part of regular meetings between the Bank and market participants, some of whom have since been arrested over the scandal.

"It is possible foreign exchange traders decided to collude to make their lives easier and richer," Carney said.

In a move likely to have ramifications for the central bank's history, he signaled that he is prepared to make the 420 year-old Bank a more open institution.

Parliament's Treasury Select Committee quizzed Carney and the bank's Executive Director of Markets Paul Fisher about allegations that bank officials condoned or were informed of manipulation in the foreign exchange market or the sharing of confidential client information.

Carney told them: "This is as serious as Libor, if not more so" and that this was an "unhappy situation" after one of them accused him of being "relaxed" about the alleged manipulations. However, he added that he expects that the investigation will "re-confirm" the integrity of Bank employees.

Bank of England Governor Mark Carney
Dylan Martinez | WPA Pool | Getty Images

(Read more: Forex manipulation: How it worked)

The new Deputy Governor will focus on markets and banking and will conduct a "root-and-branch review of how we conduct market intelligence," Carney said.

Carney got the job after Paul Tucker, the Bank insider widely tipped to succeed Mervyn King, was implicated in the Libor scandal.

Earlier, Carney stressed that the Bank's decision on when to raise interest rates will not be influenced by the 2015 UK elections.

There is "no danger" that the timing of interest rate rises, which most economists believe will start in 2015, will be affected by the elections, expected in May 2015, Carney said.

(Read more: Low interest rates and what they have meant for the UK)

BoE had no information staff knew about FX fixing: Carney

Keeping interest rates at their historic lows has helped boost the U.K. housing market in London and the South, a key element in keeping traditional Conservative Party voters happy.

Carney, appointed by U.K. Chancellor George Osborne, a Conservative Party MP, has been accused by critics of not being independent enough.

Carney also told MPs that he had been overruled by other members of the MPC on whether to make the output gap, which some economists believe could be holding back the U.K.'s recovery, public. This should help dispel concerns about the apparent unanimity of the MPC under Carney.

The Bank of England will not sell all the gilts it has bought during its quantitative easing program, worth £375 billion in total, Carney said. This should reassure some of those concerned that the assets could all be dumped on the market.

Sterling stayed flat against the euro following the news.

- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.

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BoE had no information staff knew about FX fixing: Carney