NAO reports dozens of ‘significant’ compliance breaches at Bank of England

The Bank of England has been found to have made dozens of “significant” compliance breaches despite making progress in fixing flaws after hedge funds misused the central bank’s audio messages four years ago.

The report from the National Audit Office (NAO), the public spending watchdog, examines actions taken by the central bank to improve its handling of non-financial risks and whether lessons have been learned from two high-profile scandals.

These include the 2017 resignation of deputy governor Charlotte Hogg, who failed to declare that her brother worked for Barclays, and an embarrassing security breach in December 2019 that allowed hedge funds to gain early access Audio of the bank’s press conference.

While the NAO said the central bank was “making good progress”, it warned that compliance breaches of the bank’s own staff policies had reached an unacceptable level in the 12 months to August 2023.

These included 28 significant breaches that could be as serious as failure to disclose a conflict of interest, potentially affecting the independence of senior officials and potentially resulting in disciplinary action.

They also involved 628 minor breaches, which could involve employees failing to obtain prior approval for personal transactions, including mortgages or investments, or emails being sent to the wrong address.

That’s an increase from last year’s 584 minor violations and 19 major violations.

While most breaches were self-reported, the NAO said the figures were “higher than what the central bank considers acceptable”. The 2023 employee survey also found that only 59% of central bank employees felt they could speak freely without fear of negative consequences.

Gareth Davies, Comptroller and Auditor General at the National Audit Office, said it was clear that “the Bank of England is making good progress in developing new and improved systems to understand and manage compliance risks.

“As we move forward with this work, the Bank should ensure that it continues to improve the quality and consistency of risk information, as well as staff awareness and confidence in raising issues.”

David Roberts, chairman of the Bank of England Court of Justice, said he welcomed the NAO’s report and said the bank was “committed to promoting the highest standards of integrity and ethics and will carefully consider the NAO’s recommendations”.