While it may seem like yesterday, it was nearly five years ago that the Libor scandal first broke, and with it brought scandalous suggestions that none other than the Bank of England was implicated.
As we first reported in July 2012, according to Barclays then CEO Bob Diamond, it was high level individuals at the BOE who may (or may not) have been aware that Libor had been “manipulated” and were (or were not) also active in the setting process:
BARCLAYS SAYS BANK OF ENGLAND CALLED ON OCT. 29, 2008 ON LIBOR
BARCLAYS SAYS DIAMOND MADE NOTE OF CALL; RECEIVED CALL FROM PAUL TUCKER
BARCLAYS SAYS TUCKER SAID `CERTAIN’ BARCLAYS DIDN’T NEED ADVICE; SAID LIBOR DIDN’T ALWAYS NEED TO BE SO HIGH
And yet, concerned about how deep the rabbit hole would go if a central banker was implicated, Diamond tried to cover it up:
BARCLAYS SAYS DIAMOND DIDN’T BELIEVE HE HAD GOT INSTRUCTION
BARCLAYS SAYS DEL MISSIER CONCLUDED INSTRUCTION HAD BEEN GIVEN; TOLD RATE SETTERS TO LOWER RATES
The note in question was represented below:
Needless to say, when it comes to the central bank nothing happened: a few BOE personnel were reassigned, some quietly lost their jobs, and nobody was prosecuted or charged. Certainly, nobody went to prison.
* * *
Fast forward nearly five years later, when the Libor scandal may have reemerged after a secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama.
According to the BBC, the 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down, just as suggested by Bob Diamond in 2012.
The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England. In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.
Dearlove tells him: “The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.” To which Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash.
Mr Johnson says: “So I’ll push them below a realistic level of where I think I can get money?”
His boss Mr Dearlove replies: “The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing… I am as reluctant as you are… these guys have just turned around and said just do it.“
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