Bank of England fraud probe: serious questions to be answered

Of all the revelations that have come to light since the great financial crash of 2008, the idea that the Serious Fraud Office has opened an investigation into goings-on at the Bank of England is potentially the most shocking of all.

While we don’t have any detail yet the implication is that bank traders rigged the market during the emergency money auctions designed to prop up the banks at the height of the financial crisis.

It’s sickening enough that the very auctions that were supposed to keep the banks afloat could themselves have been subject to the kind of skullduggery that we’ve witnessed in other markets such as libor and forex. But on some level the public has perhaps come to expect that there are no depths to which Britain’s bankers would not sink.

But the Bank of England? The very pillars of our economy? The people charged with keeping it all together when everyone else appeared to have lost their heads?

I say this because the other potentially very serious implication here is that Bank of England staff knew about the rigging, and did nothing, or worse still colluded in some way.

The Bank of England said late last night it had “commissioned Lord Grabiner QC to conduct an independent inquiry into liquidity auctions during the financial crisis in 2007 and 2008.”

It said that following the conclusion of the inquiry, the Bank then referred the matter to the SFO on 20 November 2014.

At the very least it’s awkward that the Bank appeared to be bumped into putting out a statement late last night after the Financial Times had published its front page calling into question the Bank’s actions.

The statement came just a day after Mark Carney, the Bank’s governor, appeared in front of the Treasury Select Committee. He was answering questions about Lord Grabiner’s investigation into what the Bank knew, when about the forex rigging scandal. But there was no mention of the second investigation Lord Grabiner had been commissioned to conduct into liquidity auctions.

Yet 24 hours later the Bank is forced to admit there was one.

One reason for the silence could simply be that it’s hard to speak about these matters if the SFO is conducting a probe. But as one MP from the committee said to me this morning. “If we knew then what we know now, Tuesday’s questioning would have been very different.”

Either way, it’s not Mark Carney that should be questioned here. It was the former governor Mervyn King in control back then. His views on the matter would certainly be very interesting indeed.

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