Bank of England ‘told about Libor fears in 2005’

TOP bank of England officials were told of concerns about the libor rate as early as 2005, witnesses claim. Court documents unearthed by the Mail reveal that fears were allegedly raised about the toxic rate years before the financial crisis. They cast fresh doubt on evidence given to Parliament by exGovernor lord Mervyn King. And they heap pressure on the bank of England following a bbC Panorama investigation this month that unearthed an alleged secret recording implicating officials in rate-rigging. Five traders have gone to jail for manipulating libor, the rate at which banks set their borrowing costs, after the scandal was exposed in 2012 and barclays fined £290.2m. Now the Mail can reveal claims that regulators secretly raised concerns about libor as far back as 2005 – two years earlier than previously thought.

Seven years later lord King told MPs that a trawl of records revealed ‘no evidence of wrongdoing or reporting of wrongdoing to the bank’.

Giving evidence in the 2016 trial of two barclays staff, libor regulator John Ewan described a 2005 meeting with bank of England officials – including deputy governor Sir Paul Tucker. Ewan said he explained that markets believed the libor rate was being set too high, transcripts reviewed by the Mail show.

‘Ewan noted there was a market consensus that the sterling-dollar libor was three to four basis points over the actual market rate,’ according to a note from the meeting read to jurors. ‘This was essentially a construct of the market as it is in the interests of the banks to have a higher libor.’

The bank of England has always denied any role in the scandal – insisting it knew nothing of any criminality and never attempted to fix rates.

Its former Governor told the Mail he stood by his original comments made to MPs in July 2012. lord King said: ‘There is a world of difference between dysfunctional markets and criminal behaviour designed to profit individual traders. This difference was examined in detail in the Treasury Committee. My evidence was clear and I stand by it. Any suggestion to the contrary is completely untrue.’ A bank of England spokesman declined to comment.