The fraud investigation at the Bank of England was kept secret for three months in defiance of Serious Fraud Office advice, according to a joint letter to The Times from the two organisations’ general counsels.
The letter reveals for the first time that the SFO specifically advised the Bank to disclose publicly the existence of the investigation when it was launched in December.
Alun Milford, counsel for the SFO, and Graham Nicholson, counsel for the Bank, said that the SFO formally decided to open an investigation on December 16. “At that stage it was open to the Bank to make a public announcement of the fact of the investigation and the SFO advised the Bank to do so.”
However, the Bank — in spite of its new emphasis on transparency — chose to keep it concealed, arguing that there were “many considerations” to be made, including the fact that at that stage nobody had been charged with any offence.
Mark Carney, governor of the Bank of England, told the Lords economic affairs select committee this week that he was advised by “the top of the SFO” to keep the investigation in confidence so as not to run any risk of prejudicing the investigation. However, he was referring to November, when there was no formal investigation to announce, as the new letter confirms. At that time the SFO did advise the Bank to stay silent, but it gave the Bank very different advice a month later, recommending disclosure.
Advertisement
However, Mr Carney made no mention of this changed policy in his evidence to peers.
Some SFO officials are understood to have been concerned when his evidence appeared to suggest that the regulator had gagged the Bank. The two counsels said that Mr Carney’s comments to the Lords committee related to November and therefore “were accurate”.
The existence of the investigation was confirmed last week. The SFO is examining evidence that liquidity schemes intended to help banks at the peak of the crisis in 2008 and 2009 were rigged, possibly with the connivance of Bank officials.
When formal fraud investigations are launched into listed companies, the SFO always recommends disclosure. A copy of the letter, which has been published online at thetimes.co.uk/business, is understood to have been sent to the Lords committee, which is expected to question the governor further on the affair when he next appears before it.