From the BBC:
The Serious Fraud Office (SFO) is investigating the way the Bank of England lent money to banks during the financial crisis, the Bank has said.
The Bank commissioned its own inquiry last year, then referred the matter to the SFO. Liquidity auctions enabled banks to access extra cash during the credit crunch that followed the collapse of Northern Rock...
As the financial crisis bit in 2007, the Bank launched a new type of liquidity auction - called long-term repo open market operations - whereby banks were allowed to put up a wider range of assets as collateral against the three-month loans. These assets included government bonds and mortgage-backed debt securities...
The exact focus of the SFO investigation is unknown, but BBC business editor Kamal Ahmed believes it may want to find out whether the banks exaggerated the value of such collateral to makes themselves look stronger, with or without the knowledge of Bank of England officials.
Surely we all knew this anyway?
The whole thing since 2007 has been a freebie for the banks and a blatant bank bail out at taxpayers' risk and expense. If the banks' assets had been worth what they told the Bank of England they were worth, then they wouldn't have been insolvent/illiquid and hence the bail out would not have been necessary in the first place.
The question answers itself: the Bank of England must have known that banks were overstating the value of their assets, end of discussion.
Debate Magazine
