SHAME OF THE BANKERS (cont)

Sir Cover-up and Gordon Brown allies dragged into rate f ix furore

DOWNING Street was last night under pressure to open a fresh inquiry into the Libor rigging scandal after a recording implicated the Bank of England and government ministers.

The leaked conversation, which was had at the height of the financial crisis, has fuelled suspicions that senior government officials leaned on banks to keep their Libor rates low.

Senior figures who could be swept up in the scandal include Sir Jeremy Heywood, who was Downing Street chief of staff, and other key allies of then prime minister Gordon Brown.

Libor is the rate at which banks lend to each other and was found to have been widely rigged by rogue bankers to boost their bonuses – leading to criminal charges against 19 people.

But regulators have also been accused of telling banks to push down their Libor rates to reassure financial markets at the peak of the credit crunch in October 2008. At the time, Labour’s Alistair Darling was chancellor.

In the recording – exposed by BBC1’s Panorama programme last night – senior Barclays manager Mark Dearlove appears to instruct the bank’s Libor submitter Peter Johnson to lower his rates. The submitter was responsible for reporting how much the bank would have to pay to borrow money.

He 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.’

Mr Johnson, who was jailed last summer for rigging rates, objects – saying this would mean breaking the rules for setting Libor. He said: ‘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... I am as reluctant as you are... these guys have just turned around and said just do it.’

MPs said the transcript of the call appeared to contradict evidence given to them by former Bank of England official Sir Paul Tucker – who was later made deputy governor – and Bob Diamond, Barclays’ disgraced former chief executive. Both men told MPs in 2012 that they were not aware Libor was being rigged and said no pressure was applied by the Bank or the government to manipulate rates.

But after hearing the recorded conversation between Barclays executives, MPs called for an investigation into the Bank of England, members of Gordon Brown’s government and Whitehall officials.

Chris Philp, a Tory member of the Treasury committee, said: ‘The evidence directly contradicts that given by Sir Paul and Bob Diamond. On the face of it, it looks like Sir Paul and Mr Diamond misled the committee. We need an urgent investigation into their 2012 testimony – but also whether the Brown government and the Bank applied improper pressure.’

As well as Sir Paul, those who could be caught up in an inquiry include allies of Mr Brown such as Ed Balls and Sir Jeremy, who now leads the civil service.

Others include former Cabinet Office official Sir Jon Cunliffe – now Bank of England deputy governor – and Tom Scholar, now permanent secretary to the Treasury.

Giving evidence to MPs five years ago, Sir Paul said he was in regular contact with all these officials over Libor, but he stressed that none had asked him to ‘lean on’ banks to submit lower Libor rates. Last night Labour Shadow Chancellor John McDonnell said: ‘This is a serious revelation. It goes to the very heart of whether our financial institutions can be trusted. It warrants an immediate investigation.’

So far the Serious Fraud Office has brought criminal charges against 19 people over Libor rig- ging. Four ex-Barclays bankers and one former UBS trader have been jailed for fraud, while eight individuals have been acquitted. The scandal has also triggered more than £6billion in fines.

Last night both the Treasury and the Prime Minister’s office played down the prospect of a fresh inquiry. Theresa May’s spokesman said: ‘The Bank of England has said it’s co-operating with the ongoing SFO investigation into Libor. You wouldn’t expect a comment on an investigation that’s ongoing.’

A Treasury spokesman said: ‘We will continue work with regulators to ensure our financial sector operates to the highest standards.’

The Bank of England stressed that Libor was not regulated at the time. A spokesman added that the Bank is ‘assisting the SFO’. Mr Dearlove is now based in Tokyo running Barclays’ Japanese unit.

‘Very serious pressure’