This page has been archived and commenting is disabled.
Did The Bank Of England Rig Emergency Liquidity Auctions During Crisis?
Late last year, the Bank of England followed in the venerable footsteps of virtually every sellside firm on the planet when it moved to dismiss its chief currency dealer Martin Mallett. Through his participation in central bank meetings with traders Mallet, who had worked at the bank for three decades, was aware of the possibility that the world’s largest banks were conspiring to manipulate the $5 trillion a day FX market but apparently failed to take the proper steps to escalate those concerns. The dismissal was of course accompanied by a cacophony of nonsense from the BOE. Here’s an amusing excerpt from our coverage of the story for those who need a refresher:
But back to the Bank of England, which it turns out, lied about its involvement in FX rigging. According to Bloomberg, alongside the FX settlement announcement, the Bank of England fired its chief currency dealer - the abovementioned Martin Mallett - a day before he was faulted in an independent investigation for failing to alert his superiors that traders were sharing information about client orders.
Martin Mallett was dismissed by the Bank of England yesterday for “serious misconduct relating to failure to adhere to the Bank’s internal policies,” according to a statement by the central bank today.
Mallett, who worked at the bank for almost 30 years, had concerns from as early as November 2012 that conversations between traders right before benchmarks were set could lead to the rigging of those rates, according a report today by Anthony Grabiner, who was commissioned by the central bank to look into what its officials knew about practices under investigation around the world. Mallett was “uncomfortable” with the traders’ practices, yet he didn’t escalate these concerns, Grabiner said.
“We’re disappointed because we hold ourselves to the highest standards -- we have an outstanding markets division,” BOE Governor Mark Carney said at a briefing in London today. “What Lord Grabiner found was that our chief dealer was aware of circumstances in the market that could facilitate or lead to improper behavior by market participants.”
And then just to keep the ball rolling, the BOE lied again!
Mallett “was not acting in bad faith,” according to the Grabiner report. He wasn’t “involved in any unlawful or improper behavior, nor aware of specific instances of such behavior,” it said.
Reuters adds, that the dismissal was unrelated to an ongoing foreign exchange scandal "This information related to the Bank's internal policies, not to FX,” a BoE spokeswoman said on Wednesday. So... the Bank's internal policies on FX rigging?
Here's how The Telegraph recently described the debacle:
An independent report published last year into the scandal reserved its criticism largely to Martin Mallett, the Bank’s former chief currency trader, saying he should have told his superiors about his concerns.
When traders at major banks were rigging foreign exchange rates, Mr Mallett developed concerns about manipulation, several years before the scandal became public.
Lord Grabiner, the barrister who carried out the report, criticised him for failing to escalate concerns, but also said the Bank needed a proper “escalation policy” to make sure that staff are able to raise the alarm.
Mr Mallett was fired over unrelated conduct issues, which Mr Carney later revealed amounted to more than 20 violations of Bank rules, including “sharing a confidential bank document, venturing personal opinions about Bank policy… inappropriate language, inappropriate attachments to emails… incidents that could have brought the bank’s reputation into dispute”.
Of course as we went on to note (and this is what we meant above when we said Mallet's dismissal was consistent with post-rigging investigations across the sellside), Mallet's only crime in the BOE's eyes was being exposed in the papers and thus he - like all of the scapegoats that were not-so-promptly dismissed across Wall Street once word got out that everything from money market rates to FX had been rigged for years - simply had to go, lest anyone should get the idea that the corruption and coverups are actually endemic and go all the way to the top.
In yet another indication that manipulation may well be unspoken (or perhaps even spoken) policy at the BOE, new details regarding the UK Serious Fraud Office's investigation into emergency liquidity auctions conducted during the crisis suggest the central bank may have played a direct role in rigging the bids. Here's FT with more:
The Serious Fraud Office is investigating whether Bank of England officials told lenders to bid at a particular rate to minimise questions about the health of their balance sheets, thereby rigging emergency auctions at the onset of the financial crisis.
It is investigating whether banks and building societies were instructed to offer roughly the same amount of collateral so no lender would be singled out for overbidding, insiders said.
Over-pledging by an individual lender at the time of the auctions could have been seen as a sign of desperation, adding more turbulence to already volatile financial markets.
The central bank introduced the auctions in late 2007 after money markets had frozen, allowing lenders to swap a wider range of assets for funding and gain access to emergency liquidity.
So essentially, in order to make sure market participants couldn't use the auctions to make accurate assessments of who might be facing the most acute pressure, the BOE instructed auction participants on how to bid. Here's more:
The SFO has deployed investigators who worked on building the case that resulted in the world’s first guilty verdict in a trial related to the rigging of the London interbank offered rate (Libor).
Their new case focuses on 2008 auctions, where lenders pledged mortgage-backed securities in exchange for UK government bonds. At the peak of the auctions, in January 2009, up to £185bn of gilts had been lent out.
What the implications of this will ultimately be are as yet unclear, but it certainly looks like this was a concerted effort to obscure risk and while the BOE will no doubt claim that gaming the auctions was necessary to avoid inciting a panic, it also means that the central bank was intent on hiding the extent to which it believed the market was in peril heading into the crisis.
We're sure we'll be coming back to this in due time. Well, then again maybe not, because as FT goes on to note, SFO will only continue its investigation if it believes "it's in the public interest" which is particularly amusing in this context as the probe itself revolves around whether the BOE was entitled to make an assessment of what it's in the public's best interest to know. If the SFO does decide the public is entitled to know more, the next question will of course be this: who's the Mark Mallet that instructed banks on how to bid?
»
- 9237 reads
- Printer-friendly version
- Send to friend
- advertisements -
is the sky blue?
i didn;t even need to read the article
Is this a trick question
BOE has a long and colorful history and this ain't even a biggie for them. Basically, the headline is a self-answering question.......
Why the hell you think the gold, rate and FX "Fixes" are called "Fixes"?*
* You need Marriam Webster for help?
So what was Mallett's "inappropriate language" and where are the "inappropriate attachments to emails"? The executives filing these charges run the Bank of England. Did Mallett put his dick into a dead pig's mouth like PM David Cameron? Did he cover up the bumping off of a raped kid in the Dolphin Square apartments as part of a pedophile ring, something then Home Secretary Leon Brittan did in 1986? No, Mallett did something worse, he looked ready to blab about Bank of England FX activities, so he had to be discredited.
is the sky blue
Yes. Bob Diamond pretty much affirmed that before he was banished to the Dark Continent.
He probably walked away with a nice pension/severance anyway.
After 3 decades? You bet your ass he has a tall stack......
The Old Lady has something hidden in her handbag.
There's a lot hidden in there. People seem to forget that the City of London is in reality a de facto city state that even the Queen of England must ask permission to enter.
""Whenever the Queen makes a state entry to the City, she meets a red cord raised by City police at Temple Bar, and then engages in a colourful ceremony involving the lord mayor, his sword, assorted aldermen and sheriffs, and a character called the Remembrancer. In this ceremony, the lord mayor recognises the Queen's authority, but the relationship is complex: as the corporation itself says: "The right of the City to run its own affairs was gradually won as concessions were gained from the Crown."
https://en.wikipedia.org/wiki/City_of_London_Corporation
Oh and for those who don't know who the Remembrancer is
"The City of London is the only part of Britain over which parliament has no authority. In one respect at least the Corporation acts as the superior body: it imposes on the House of Commons a figure called the remembrancer: an official lobbyist who sits behind the Speaker’s chair and ensures that, whatever our elected representatives might think, the City’s rights and privileges are protected"
too big to jail, great read, William Black, how to rob a bank, talks about the SNL crisis of the '90's, today's banks make that look like peanuts, I was outraged about the bailout of the SNL industry by Bush One at the tune of 60 billion dollars, which is nothing compared to today.
http://www.ted.com/talks/william_black_how_to_rob_a_bank_from_the_inside...
Funny, I wouldn't have assumed otherwise.
Accepting the behavior of a snake is one thing, accepting the behavior of a human(s) that acts like a snake is quite different. We should not lull ourselves into accepting behavior of an institution that has a direct role in social responsibility. No need to audit central banks???
The answer to every "did the bank rig ___?" question is yes, yes they did. Need it even be asked?
BY FUCKING DEFINITION, THE BOE IS A RIGGED SYSTEM.....all central banks are a scam.
payback is going to be a bitch for these banks. Jon Corzine you can run but you can't hide. Anyone with a brain knows these banks are completely corrupt...EVERYONE. And the pendulum is swing...and the bankers didn't figure out if they rescued everyone they would be forgiven....but they stole the rescue money and the next generation is left with the debt
odd no mention of the goldman employee Mark Carney running the Goldman trading house doing business as, the Bank of England
"We will make you money- don't ask how... if we screw up- the tax payers will give you back your principle..."
one good thing is, it took simon Wiesenthal 30- 40 yrs, to track down, crimes against humanity, Nazis.
now we have the internet, it will make the job of hunting down politicians, bankers, and cronies, of the same crimes, only of a greater magnitude.