Tuesday 16 January 2018

BoE dragged into scandal over email 'sanctioning' rate fixing

Oliver Wright, James Moore and Nigel Morris

The Bank of England was dragged into the interest-rate rigging scandal last night after an email was released suggesting it may have encouraged banks to doctor their borrowing costs during the financial crisis.

The email -- an account of a conversation between the chief executive of Barclays, Bob Diamond, and the Deputy Governor of the Bank of England, Paul Tucker -- appears to show Barclays was under the impression that manipulating rates was being sanctioned at the highest level.

The email was released by Barclays ahead of today's high-profile showdown between Mr Diamond and MPs on the Treasury Select Committee. Mr Diamond is certain to be asked what advice he received from the Bank of England on the reporting of Barclays' Libor rates.

Any suggestion that the manipulation was authorised by Mr Tucker, the Permanent Secretary at the Treasury Nicholas Macpherson or government ministers would be highly damaging and increase pressure for a full public inquiry.

The email came at the end of a day of dramatic developments in which it emerged that:

¦ Mr Diamond could be line for a payment of up to £30m (€37.3m) after announcing his immediate departure as head of the bank. Barclays was said to be attempting to get its former chief executive to waive up to £20m in bonus payments.

¦ Mr Diamond's resignation was triggered by a call from the Governor of the Bank of England, Mervyn King, to Barclays' chairman, Marcus Agius. Some reports suggested Mr King told Barclays that unless Mr Diamond went, the Bank of England might not stand as backer of last resort.

But it was the release of an internal Barclays email which could prove the most significant development.

The email, dated October 30, 2008, was from Mr Diamond, then head of Barclays Capital, to John Varley, Barclays' chief executive and copied in to Jerry del Missier, then co-head of the investment bank.

In it he details a phone conversation with Mr Tucker who was concerned at Barclays' high reported Libor borrowing costs.

Mr Diamond said the deputy governor told him he had received calls "from a number of senior figures within Whitehall" to question "why Barclays was always toward the top end of the Libor pricing".

Mr Diamond said he told him that the Treasury should be told it was because other banks were under-reporting their own borrowing costs. He said the response was, "Oh, that would be worse."

Damaging

In the most damaging section of the email Mr Diamond says he was told the calls from the Treasury were "senior", before appearing to give a strong hint that Barclays should also under-report its borrowing rates. He said Mr Tucker told him "it did not always need to be the case that we appeared as high as we have recently".

But in its submission to the select committee, Barclays claimed that was not what Mr Diamond meant by the email. "Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier," Barclays said.

"Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However, Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters." (© Independent News Service)

Irish Independent

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