British fraud prosecutors expect a speedy investigation into the possible rigging of efforts to support the financial system during the credit crunch after they moved to start a formal inquiry, a source familiar with the investigation said.
The Serious Fraud Office has said it is looking into liquidity auctions held by the Bank of England in 2007 and 2008 — which aimed to help banks to weather the onset of the financial crisis — after receiving material from an inquiry commissioned by the central bank.
The source said the investigation is unlikely to be as lengthy and costly as some of the large and complex cases handled by the SFO, such as the continuing investigation into alleged manipulation of Libor interest rate benchmarks, which began in 2012.
For its biggest cases, the SFO has had to request so-called “blockbuster funding” from the government to prop up its meagre annual budget, around 35 million pounds ($53 million).
The BoE said late on Wednesday that it had carried out an internal investigation into the auctions and passed the information to the SFO in November last year.
The SFO said on Thursday that it had begun an in-depth, criminal investigation in December, less than a month after receiving the material from the BoE.
The source told Reuters that the material raised sufficient concerns that a prompt investigation was merited without the need to first seek further information or search warrants.
It is not known if the investigation is focused on BoE staff or employees, on banks that took part in the auctions, or both.
The inquiry remains in the early stages and has yet to pass the prosecutorial “code test”. The test means prosecutors need to decide whether there is sufficient evidence to provide a realistic prospect of conviction and that a prosecution is in the public interest, the source said.
The Bank said last week it had made a series of changes to how it gathered information from markets after it was drawn into a scandal over the alleged manipulation of foreign exchange markets last year.
It also said it had improved record-keeping and provided more training for staff once a separate inquiry found its chief foreign exchange dealer failed to escalate his concerns about possible currency market-rigging.
In recent months, the Bank has passed on more than 40 cases of possible misconduct for investigation by Britain’s Financial Conduct Authority, the main regulator of financial markets.
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