The Bank of England has called in one of the most respected figures in the legal world, Anthony Grabiner QC, to investigate allegations that some of its staff may have been involved in manipulating the £3 trillion-a-day foreign exchange markets for almost 10 years.

Lord Grabiner was hired by News Corp to chair its standards committee in the wake of the phone-hacking scandal. He is thought to demand £3,000 an hour for his time though he is likely to be charging the Bank a lower rate.

Grabiner has been appointed by the Bank's oversight committee, which was created in 2012 to police the central bank and is composed entirely of non-executive directors of the Bank. The committee last week began a formal investigation into whether any bank staff knew about attempts to rig the foreign exchange markets. Allegations about potential fixing of foreign exchange markets emerged last year. The Bank then began an initial inquiry into whether its officers were aware of or had condoned the potential manipulation of a "fix" which takes place daily at 4pm.

The Bank's governor, Mark Carney, told MPs this week that the scandal had the potential to be bigger than the rigging of Libor, which has resulted in big-name banks being fined billions of pounds on both sides of the Atlantic.

The focus is on the benchmark known as WM and which is used to set daily prices, through a "fix", on large number of currencies. The allegations are that rival traders shared information about their clients' positions which may have influenced the price of the fix and that the Bank of England may have known about this.

Grabiner will look at information dating back to 2005 when foreign exchange dealers from the top firms around the City first began to meet officials from the Bank three or four times a year.

Minutes of these meetings released by the Bank last week showed that they met in restaurants around the City and, it appears, began to raise the topic of possible manipulation of the foreign exchange markets in a meeting in July 2006.

Paul Fisher, the Bank's markets director, who appeared with Carney when he faced MPs this week, said that his reading of those minutes "did not convey to me that markets were being rigged."

The Bank initiated a review of its role in potential rigging of the markets after newswire service, Bloomberg reported that the traders had told the central bank in 2012 they were exchanging information about their clients.

The outcome of the internal review was announced a week ago when the Bank of England revealed it had suspended a member of staff. That move came after the law firm Travers Smith had analysed more than 15,000 emails, 21,000 Bloomberg and Reuters chatroom records and more than 40 hours of telephone call recordings.

At the time the Bank said no evidence of collusion with foreign exchange traders at banks around the City had been found but the oversight committee decided to launch a formal inquiry after the employee was suspended.

Grabiner, who acted for Liverpool Football Club in its victory over previous owners Tom Hicks and George Gillett, is now going to lead the inquiry with the assistance of Travers Smith. Sir David Lees, who chairs the court of the Bank – akin to a board of directors – said the oversight committee which he also chairs had first been informed of the allegations in November.

"The oversight committee believes that it is essential that matters raised by the Bank's initial review should be thoroughly and independently examined and that the Bank's executive should act on any lessons learned," Lees said.

It is not clear what timescale Grabiner has been given and the Bank warned that while it would publish the report it may not do so until the Financial Conduct Authority has completed its investigations into the market.

Twenty people have been suspended or fired from big City firms as the investigation – also being conducted by US regulators – continues. The FCA is continuing to investigate the rigging of Libor after fining five firms – starting with Barclays in June 2012 – and is still thought to be looking at the activities of three others.

Carney said of allegations about the foreign exchange markets: "This is as serious as Libor, if not more so because this goes to the heart of integrity of markets."