SFO probes Bank of England emergency auctions

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 Financial Times 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.