Belfast Telegraph

Probe urged over claims Bank of England pressed lenders to lower Libor rate

Politicians are calling for a Government probe following reports that 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.

Labour MP and shadow chancellor John McDonnell said the claim throws trust in Britain's financial institutions into question.

"This is an extremely serious revelation that contradicts past assurances about the role of the Bank of England in the Libor scandal.

"It goes to the very heart of whether our financial institutions can be trusted.

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

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 that 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 BBC report, a Bank of England spokesperson 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 spokesperson 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.

Tory MP and Treasury Select Committee member Chris Philp viewed the BBC's evidence over the weekend and is calling for an urgent inquiry.

"It appears that it wasn't just a few kind of rogue people in junior levels in banks, it looks like the instructions were being given from higher up, and in fact actually there are references in the call to instructions from the then-government ... If the then-government were issuing instructions to banks, that would be pretty shocking."

He added: "At a minimum I'll be suggesting that the Treasury Committee reopens its investigation, but it may be that there's a more formal inquiry required as well."

Mr Philp defended the committee for not having caught the Bank of England's potential involvement in the scandal.

"If people give misleading testimony to a parliamentary committee then I don't think you can hold a parliamentary committee responsible for that."