Well it is bonus time; so I suppose it is open ‘banker bashing’ season! How convenient that the SFO’s investigation into rate manipulation at BOE liquidity auctions by some bank personnel back in 2007/8, should be exposed. It is also alleged that some BOE personnel were ‘in the know’ about this alleged financial skulduggery.


Many will recall that the BOE asked Lord Grabiner to conduct an independent inquiry last November to find out if there were any irregularities in these auctions conducted by the BOE for liquidity purposes at the time of the Northern Rock Debacle in 2007/8. These auctions enabled the banking sector to acquire extra cash, when wholesale money markets had dried up.  At the time the BOE also offered the banks the opportunity of swapping commercial bills/bonds for Treasury bills to ease the depth of the credit crisis. Clearly Lord Grabiner, post his examinations, was of the opinion that there were questions to answer; so the matter was referred to the SFO.


No one can object to a calmly organised, logical and in depth inquiry.  Bad behaviour cannot be condoned nor should it be.  However this issue has all the hallmarks of a vituperative nasty unpleasant witch-hunt. Emotions are running far too high.


It strikes me that since 2008, even though there has been evidence of very bad behaviour and greed from a few people within the banking sector with the bonus culture understandably causing great offense, few have been prepared to embrace an agenda of change for the good rather than just for retribution purposes.  I think that is a really sad fact. Everyone forgets that the City has provided an astonishing springboard for the expansion of business and trade on a global basis.


There are suggestions that the BOE has lost credibility over this – nonsense!  For a start bank regulation was the domain of the FSA/FCA. The FSA had insufficient staff at the time to do justice to their responsibilities.  Secondly as with LIBOR, which was never an exact science and the responsibility for setting it should never have been given 14 members of a trade association, allowing them to arbitrate over $500 billion of loans, the manipulation of rates for loans from the BOE should have been impossible – auction or not!


There has also been talk of the reputations of Governor Lord King and his deputy Sir Paul Tucker being tarnished and how shrewd it was to appoint Mark Carney as Governor – again rubbishing the previous incumbent and his deputy is unfair.  Both did a fantastic job handling the liquidity crisis in a calm deft manner, which was essential at a time of such gravity and great economic uncertainty.  This whole issue is in danger of becoming a convenient ball to kick around Threadneedle Street and Canary Wharf – thoroughly emotive and counterproductive.


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