Whitehall did not ask us to lower Libor rate: BoE deputy
Bank of England deputy governor Paul Tucker has told MPs that he "absolutely" refuted claims he attempted to influence Barclays into manipulating the Libor rate.
Speaking before the Treasury Select Committee, Mr Tucker said that a record of a contentious phonecall he had with former Barclays boss Bob Diamond about lending rates gave the "wrong impression".
The deputy governor found himself in the spotlight after Mr Diamond released the note, in which it has been suggested Mr Tucker was encouraging the bank to submit lower Libor submissions in light of concerns from senior Whitehall figures. Mr Tucker confirmed one of the Whitehall figures was the then Downing Street chief of staff Sir Jeremy Heywood but denied he had attempted to influence Barclays into rigging rates.
Mr Tucker said he denied "absolutely" that any Whitehall officials or Government ministers ever encouraged him to "lean on" Barclays or any other bank to lower its Libor submissions.
Mr Tucker said that concerns about Barclays' submissions existed when he spoke to Mr Diamond in October 2008 not only in Whitehall but also in the markets. After the launch of a package of international efforts to shore up the markets both officials and markets were monitoring Libor and found that - compared to many other participants which had lowered their submissions - "Barclays continued to pay higher rates in the market, as reflected in their Libor submissions".
Attention was focused on whether Barclays had taken the right decision in declining state support.
Mr Tucker told the committee: "There were two separate and related concerns, not only from Whitehall but from within the bank and within the market.
"One was: 'Is the package working and why isn't it working here as quickly as it appears to be working in the US?'
"The other element was: 'Is Barclays OK? Was the right decision taken when Barclays didn't take capital from the Government?'"
Mr Tucker described the setting of the Libor rate as "a cesspit" and called for an end to the practice of "self-certification" under which banks submit figures on the basis of their own judgments rather than actual transactions.
Barclays has been the focal point for a row over banking culture after the bank was fined £290m by UK and US regulators for manipulating the Libor rate.