Libor spotlight on Bank of England

Politicians are calling for a government probe following reports the Bank of England may have been involved in Libor manipulation.

The BBC’s Panorama programme claims to have uncovered a 2008 recording between a senior Barclays manager and its Libor submitter that suggests the bank was exerting pressure on lenders to lowball the rate.

Mark Dearlove, a senior manager at Barclays, reportedly told the submitter that he needed to lower his Libor rate, saying: “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.”

Libor, the London Interbank Offered Rate, is the rate at which banks lend to each other, and is used to set millions of pounds worth of financial deals including car loans and mortgages.

It is also used in complex overseas financial transactions.

Shadow chancellor John McDonnell said the claim throws trust in Britain’s financial institutions into question.

“Therefore it warrants an immediate high-level investigation, and the Chancellor must act straight away to ensure this happens,” he said.

The BBC said the recordings raise questions about evidence given by former Barclays boss Bob Diamond and Paul Tucker, who served as the central bank’s deputy governor, to the Treasury Select Committee in 2012, regarding a call between the two men in 2008.

Mr Diamond maintained an email note based on that conversation, which discussed how Barclays had consistently been near the top end of Libor pricing, was not an instruction to artificially lower Barclays’ reported rate.

He quit Barclays nearly a week after the bank’s £290 million Libor-rigging settlement in the summer of 2012.

Responding to the Panorama report, a Bank of England spokesman said: “Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.

“Nonetheless, the Bank of England has been assisting the SFO’s (Serious Fraud Office) criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO.”

The spokesman said that while the bank is “committed” to publishing material related to the investigation when appropriate, it is “not in a position” to do so until the SFO lays that investigation to rest.

Picture: Getty. A City worker passes by the Bank of England’s headquarters in London.