The market was alive with rumours yesterday that substantial profits had been made on the back of advance information, leading to significant price rises in the 24 hours before the announcement.
A senior market source said: 'It was absolutely disgraceful. There was heavy buying of sterling futures on Wednesday and gilt prices were pushed up a point.
'After what had gone on I would not be surprised if the Bank of England called someone in. We complained immediately after the event.'
It is understood that no formal complaint backed by hard evidence has yet been made to the Bank. But market-makers informally made it well aware of their views, and at least one is believed to be contemplating a formal complaint.
The borrowing deal was led and guaranteed by National Westminster, Barclays, Lloyds and Midland, which had been discussing it for more than a week. 'The big four were under absolute pain of death to keep quiet,' a spokesman for one of the banks said.
One source pointed out that on Wednesday a further 14 co-managers of the issue were brought into the discussions, widening the circle of British and continental banks in the know. On Thursday morning futures dealers in Frankfurt with UK links are said to have indicated that a major event was imminent in the markets.
A banking source said all the co-managers had the 'highest credentials' and were used to dealing with confidential information.
Gilts prices were up to pounds 3 higher after the details of the package were announced. They were boosted because the money raised from foreign currency borrowing would be used to help fund the public sector borrowing requirement, thus reducing - by up to a half - the amount of gilts to be sold this year.
The London International Financial Futures Exchange (Liffe) said it had looked at the run-up to the announcement and was satisfied that no untoward trading was taking place.
Martin Owen, chief executive of NatWest Markets, one of the four leaders of the issue, said that there were 'absolutely no unusual positions' in any part of the business.
He said that NatWest had received no complaints from outside, but added: 'There were lots of complaints from our own traders that if only they knew they would have made a lot of money.'
The procedure the banks followed was to arrange the deal in syndicated loan departments behind a 'Chinese wall', which blocked the transfer of information.
The Bank of England refused to comment on whether it had received any complaints, but said any that were made would be investigated.Reuse content