Financial Times

Bank of England probed on whether auctions were rigged to check volatility

by Caroline Binham and Lindsay Fortado

September 29, 2015 | 7:38 am
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The Serious Fraud Office is investigating whether Bank of England officials rigged emergency auctions at the onset of the financial crisis by telling lenders to bid at a particular rate to
minimise questions about the health of their balance sheets.

The SFO is looking at whether banks and building societies were told to offer about the same amount of collateral so no lender would be singled out for overbidding, people familiar
with the probe said.

Over­pledging by an individual lender at the time of the auctions could have been seen as a sign of desperation, adding to volatility in the financial markets.

The central bank introduced the auctions in late 2007 after money markets had frozen, allowing lenders to swap a wider range of assets for funding and gain access to emergency
liquidity.

The SFO, which launched the probe this year, is deciding whether it is in the public interest to pursue the case. The BoE action has been characterised as an attempt to spare the
financial system further stress when it was on the brink of meltdown. A decision whether to bring charges is expected before the end of the year.

BoE officials have attended voluntary “by appointment” interviews with the SFO, the people close to the probe said.

The SFO has deployed investigators who worked on building the case that resulted in the world’s first guilty verdict in a Libor­related trial.

Their latest case focuses on 2008 auctions, where lenders pledged a portfolio of mortgage­backed securities in exchange for UK government bonds.

The BoE has already attracted the scrutiny of enforcement agencies on both sides of the Atlantic over actions taken at the height of the crisis.

A crucial chapter of the Libor scandal involved an alleged conversation between Sir Paul Tucker, then a BoE deputy governor, and former Barclays chief Bob Diamond about
manipulating Libor submissions. Sir Paul later testified to a parliamentary committee that he did not give Barclays instructions to lower its Libor submissions.

The BoE said: “Given this is an active investigation, understandably the SFO has asked the bank not to comment while it is ongoing. We are committed to providing as much clarity as
possible to the public.”

Caroline Binham and Lindsay Fortado


by Caroline Binham and Lindsay Fortado

September 29, 2015 | 7:38 am
  |     |     |   Start Conversation

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