SFO launches investigation into Bank of England liquidity auctions | Business | The Guardian
▻http://www.theguardian.com/business/2015/mar/04/sfo-launches-investigation-into-bank-of-england-liqudity-auctions
The Bank of England is facing an unprecedented criminal investigation by the Serious Fraud Office over emergency lending measures it took at the height of the credit crisis to inject cash into financial markets.
In late 2007 and early 2008, as the authorities struggled to prevent financial markets from freezing up, banks were invited to bid to borrow funds from the Bank of England in exchange for collateral in a series of so-called “auctions”.
It is the conduct of these liquidity auctions that is now being investigated by the SFO, which confirmed it has opened an official investigation. In a statement, the SFO said it was “investigating material referred to it by the Bank of England concerning liquidity auctions during the financial crisis in 2007 and 2008”.
In response, Threadneedle Street said: “The Bank can now confirm that it commissioned Lord Grabiner QC to conduct an independent inquiry into liquidity auctions during the financial crisis in 2007 and 2008. Following the conclusion of that initial inquiry, the BoE referred the matter to the SFO on 20 November 2014.”
The Bank refused further comment. It remains unclear why the investigation was not made public before now.
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Minouche Shafik, the Bank’s deputy governor for markets and banking, said it was time to end the era of “constructive ambiguity” in the contacts between Bank officials and City traders, which were traditionally referred to as “fireside chats”. News of this new criminal inquiry will underline fears that the Bank’s relationship with the City was sometimes too cosy.