Ex-City Minister Pressures Bank On QE 'Abuse'

By Mark Kleinman, City Editor

The City Minister during the last financial crisis has stoked growing pressure on the Bank of England amid an inquiry by the Serious Fraud Office (SFO) into a series of emergency schemes used to stave off the collapse of Britain's banking system.

Sky News can disclose that Lord Myners, who served during the latter stages of the last Labour Government, tabled a written question in the House of Lords last week to ask ministers "whether any allegations or evidence of market abuse have been brought to their attention in connection with the operation of the asset purchase scheme used to implement quantitative easing [QE])".

The £375bn QE programme, which was launched by the Bank of England in 2009 in an attempt to stimulate the crisis-hit UK economy, works by using electronically created money to buy financial assets such as Government bonds.

Lord Myners urged ministers to disclose whether the central bank had investigated its own role in the administration of the asset purchase scheme, after it emerged that the Bank of England had referred itself to the SFO in relation to liquidity auctions conducted during the financial crisis.

The questions from the former City Minister come amid intense scrutiny of the Bank of England's actions during the financial emergency which began with the run on Northern Rock in 2007.

Mark Carney, the current Governor, has promised to deliver greater accountability during his five-year term at the helm.

Last week, it said: "Following the confirmation by the Serious Fraud Office (SFO) that it is investigating material referred to it by the Bank of England, 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.

"Given the SFO investigation is ongoing, it is not appropriate for the Bank to provide any additional comment on the matter at this time."

City sources pointed out on Monday that the Financial Conduct Authority had identified and pursued one trader's attempt to manipulate gilt prices during the QE programme.

In March last year, Mark Stevenson, a bond trader, was fined nearly £663,000 and banned after being found guilty of deliberately inflating the value of his gilt holding.

The FCA said its investigation "found this was the action of one trader on one day, and there is no evidence of collusion with traders in other banks".

At the time, the Bank of England said it condemned "all forms of market manipulation".  

"This process demonstrates the benefits of the Bank working in close co-operation with the FCA."

In July 2013, Paul Fisher, an executive director at the Bank, said it had not identified any other cases of abuse relating to QE.

The Bank of England referred to Lord Myners' questions by saying: "If the Bank is contacted by a government department to assist with a response to a Parliamentary Question, the Bank would respond via the appropriate channel – the government department, and not via the media."

The disclosure of Lord Myners' intervention comes as the European Central Bank launches its own 60bn Euros-a-month programme of bond purchases.

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