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SFO probes Bank of England emergency auctions

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The Serious Fraud Office is investigating whether Bank of England staff told lenders to bid at a particular rate to avoid questions about the health of their balance sheets in the run-up to the financial crisis, the FT reports.

The BoE introduced emergency auctions in 2007 in a bid to allow lenders to access emergency liquidity as money markets froze up. Banks and building societies were essentially invited to borrow funds from the Bank in return for collateral.

According to the report, the SFO is analysing whether lenders were told to offer roughly the same amount of collateral so no firm would be singled out for overbidding during the process.

The focus of the SFO case is said to be auctions that took place in 2008, where lenders pledged mortgage-backed securities in exchange for UK government bonds.

BoE officials have attended voluntary “by appointment” interviews with the SFO as the body considers whether it is in the public interest to pursue the case and proceed with charges, the FT says.

The SFO declined to comment.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Banking is about confidence. I remember that there was a distinct lack of it when looking at the queues outside Northern Rock on Moorgate back in ’07. What’s described here doesn’t sound like a perfect situation but we weren’t in one at the time. The public had (and still has) to believe that no one bank was at greater risk than any other.

  2. Sam, this will be a cover up as the SFO will simply say it is not in the public’s best interest as it will decrease confidence in the banking sector? Talk about insanity! If someone breaks the law they should be held accountable and criminal activity from across all sectors of UK financial sectors has been ignored with the same immoral ignorance.

    • Steven, I’m certainly not suggesting that Illegal behaviour is brushed under the carpet but in times of national emergency and I’d say that the first potential Bank run in the UK in 160 years qualified that the normal rules of engagement are necessarily suspended. Otherwise there wouldn’t be a a civil servant in the land that would make a move without explicit approval. Something that might include capital controls or something equally drastic needs to be in place between Friday 5pm and Monday 9am. They had to move fast and to be fair they did eventually suspend normal rules and gave unlimited protection to NR depositors. Something no other depositor in the UK outside NS&I had.

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