The Bank of England (BoE) has been implicated in the Libor rigging scandal, according to a BBC Panorama investigation.
The London Interbank Offered Rate (Libor) is the interest rate at which banks lend between each other. It consequently sets the benchmark for average clients’ loans and mortgages.
In 2012, a whistleblower alerted regulators to the common manipulation of the rate, including the false inflation or deflation of the rate to result in bigger profit margins.
Now, a recording uncovered by the BBC seems to show Britain’s central bank bullying commercial institutions to push down their Libor interest rates throughout the 2008 financial crisis.
The recording also raises doubt over evidence given in a 2012 Treasury select committee hearing by Bob Diamond, the one-time boss of Barclays, and Paul Tucker, who later became the BoE’s deputy governor.
“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,” senior Barclays manager Mark Dearlove is heard instructing Libor submitter Peter Johnson in the leaked recorded phone call.
“So I’ll push them below a realistic level of where I think I can get money?” Johnson replies, objecting to the rule-breaking move.
“The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing … I am as reluctant as you are … these guys have just turned around and said just do it,” Dearlove responds.
On the same day, Tucker, then an executive director at the BoE, phoned Diamond to discuss Barclay’s Libor rates.
Several banks have been fined more than £6 billion (US$7.44 billion) for letting submitters be influenced by requests from senior traders to manipulate their rates at the service of banks’ interests.
“The establishment’s cover-up of senior government and Bank of England officials involvement in the Libor rigging scandal now warrants a thorough, judicial inquiry,” Debt Resistance UK spokesman Joel Benjamin told RT.
“Junior bank traders including Tom Hayes have been thrown to the wolves and scapegoated, while officials including Barclays CEO Bob Diamond, and the Bank of England’s Paul Tucker escaped prosecution.
“Libor rigging was not a victimless crime, but we are yet to hear of the thousands of victims left out of pocket by collusion between the government and a criminal, out of control banking sector, which rescued bank balance sheets at the cost of [small and medium-sized enterprise] clients.”
The BoE has not responded to the specific allegations, claiming Libor was not regulated in 2008.