- Phone call between Bob Diamond and Paul Tucker is said to have led to traders 'mistakenly' believing they had Bank of England backing to fix Libor
- Barclays chief executive Mr Diamond could give 'explosive' evidence about his discussions with the Bank when he appears before MP on Wednesday
By James Chapman, Political Editor and James White
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'Explosive' revelations pinning some of the blame for the Libor-fixing scandal on the Bank of England are expected when Barclays chief executive Bob Diamond gives evidence to MPs on Wednesday.
Traders apparently 'mistakenly' believed the Bank was happy for them to fix the rate, following a telephone call between Mervyn King's deputy Paul Tucker and a 'senior' Barclays manager now known to be Mr Diamond.
The Bank of England has categorically denied anything to do with fiddling the rate which banks borrow money at - which in turn affects how much they charge borrowers on products including mortgages and credit cards.
'Explosive': Barclays chief executive Bob Diamond (left) could give testimony about his discussions with the Bank if England, whose deputy governor is Paul Tucker (right)
The Daily Mail revealed on Saturday that rumours were swirling in Whitehall about what discussions the Bank and the Treasury had with banks about Libor.
The rate acts as a crucial indicator of the health of the banking sector, and therefore the wider economy.
In 2007, experts began to express concern that the rate was rising, suggesting banks were becoming wary of lending to each other.
According to two separate official reports prepared on both sides of the Atlantic, a senior Barclays official and a senior figure at the Bank talked on October 29, 2008.
The Bank official is alleged to have asked why Barclays’ Libor submissions were higher than those of other banks.
The Financial Services Authority’s report on Barclays published on Wednesday said Mr Tucker spoke with a senior Barclays manager now known to be Mr Diamond on October 29 in a routine telephone call.
In it, he made ‘no instruction for Barclays to lower its Libor submissions’.
But the report added: ‘However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred.
‘This meant that Barclays’ submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays’ Libor submissions.’
Casting his mind back: Mr Diamond, who is facing calls to resign, is understood to have a 'different recollection' of discussions between Barclays and the Bank to that held by Mr Tucker
Submitters are the managers who give borrowing data to the British Bankers Association’s Libor-setting committees.
The FSA report refers to ‘a telephone conversation between a senior individual at Barclays and the Bank of England during which the external perceptions of Barclays’ Libor submissions were discussed’.
Under scrutiny: Barclays chief executive Bob Diamond (left), with Marcus Agius, who is resigning as the bank's chairman
According to the BBC’s business editor Robert Peston, no contemporaneous minute or recording of the conversation was made, but Mr Diamond and Mr Tucker ‘have different recollections of it’.
US documents conclude that Mr Tucker did not give any instruction to artificially depress the interest rates.
A Bank of England spokesman said: ‘It is nonsense to suggest the Bank of England was aware of any impropriety in the setting of Libor.
‘If we had been aware of attempts to manipulate Libor, we would have treated them very seriously.’
But the fact that the pair were talking about Libor at a time when Barclays was submitting false information will leave Mr Diamond, who is due to testify to Parliament on Wednesday, facing difficult questions.
The conversation could also prove awkward for Mr Tucker, who is a leading candidate to succeed Sir Mervyn King as governor next year, as well as prompting questions about whet her the Treasury had any similar discussions with the banks.
Business Secretary Dr Cable said yesterday that the public wanted to see bankers prosecuted if they had committed criminal offences, and revealed that ministers would launch a consultation this week on criminal sanctions for directors of failed banks.
‘If there has been criminal activity people must be brought before the courts,’ he told Sky News.
Dr Cable added: ‘[The public] just can’t understand why people are thrown into jail for petty theft and these guys just walk away having perpetrated what looks like a conspiracy.’
However, Lord Turner, chairman of the FSA, said Libor-fixing did not fall foul of the current law.
A Bank of England spokesman confirmed that Mr Tucker was one of the parties involved.
He said: ‘The call referred to in the report was one of many regular market calls made by the Bank of England, in this case by P aul Tucker.’
A Barclays spokesman declined to comment.
Getting tough: Business Secretary Vince Cable said the public wanted to see bankers prosecuted if they had committed criminal offences
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The blame game begins.
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Understandable mistake. It was fix Labour, not fix libor, and it would have been a lot cheaper.
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Surely if King and the MPC (monetary policy committee) keep dropping the base rate they EXPECT the banks to put their own rates down? "England expects every bank to do its duty" -- It is not beyond the bounds of possibility that someone would contact the Libor Banks and say `get on with it` if they thought that rates were not dropping quickly enough? Now they put the telescope of memory to their blind eye!
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Is this what was meant by the way the Bank of England operated by a series of nods and winks...
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Well there's a turnaround for the books - Bob Diamond has discovered that he is not God after all. The higher they fly the harder they fall.
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HE thought the BANK of ENGLAND etc. HE earned £18,000.000 last year and he appears not to know the difference between right and wrong. Managed to keep it quite though. FOR WHAT.
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And if the Bank of England knew then I would find it hard to believe the Government of the time didn't know as well!
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Bod Diamond is a desperate man clutching at straws to save his skin. This is why he should go now, not allowed to resign but be sacked.
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"A phone conversation between deputy Bank of England governor Paul Tucker and a ‘senior’ manager at Barclays is said to have led to traders ‘mistakenly’ believing they were working under an instruction from the central bank to fix the Libor â€" the interest rate at which banks lend money to each other." Right, now there MUST be an in-depth enquiry under oath to get to the bottom of this appalling and quite disgusting alleged collusions between banks and other financial and/or regulatory bodies.
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I can't believe that the bank of England didn't suspect something was amiss with the rates. The bank of England must surely be aware of the state of the markets and our banks at all times, it knows when we are in recession, it knew when the banks needed bailing out , but it sounds like a bit like the MPs who were all fiddling their expenses, said nothing until they were found out and then came out saying how disgusting it all was. It was benefitting the country at the time for the B of E to say nothing, probably thinking it would never come out. unfortunately lies always have a way of coming out. If new laws are being brought to make it a criminal offence to any dishonesty or corruption going on in the banking sector then it should apply to the B of E as well.
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