Bank of England under investigation by SFOApril 2015
The conduct of the Bank of England, as the UK’s central bank, in lending money to commercial banks during the 2007-08 financial crisis is being investigated by the Serious Fraud Office (SFO).
Extra cash was lent through liquidity auctions, in which banks submit bids related to how long they need loans and how much collateral they can offer.
Banks would state the interest they were willing to pay, and the loans would go to applicants willing to pay the most, which are presumed to be those most in need of liquidity.
The Bank of England has already held its own inquiry into whether staff knew or participated in manipulating the auctions, and has now passed the investigation to the SFO.
The fraud team is thought to be looking at potential malpractice by individuals at the borrowing banks and to be considering possible collusion by Bank of England staff.
Another line of inquiry is believed to be into whether the borrowing banks exaggerated the value of their collateral to appear stronger, with or without Bank of England officials’ knowledge.
Lending under the scheme is said to have reached £180bn ($265bn, €€248bn). The arrangement ended in 2010.
A new policy has now been produced by the Financial Conduct Authority (FCA), the UK’s independent regulatory body, to define individual responsibility.
Martin Wheatley, the FCO chief executive, explained: “How a firm conducts its business and treats its customers must be at the heart of how it operates, and this has to start at the top.
“[These] policy measures are an important step in ensuring that regulators have the tools at their disposal to hold individuals to account and they build on the cultural change we are beginning to see in the boardrooms of firms across the country.”
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