Bank of England dragged into Libor row

UK Political Correspondent

Wednesday 4 July 2012

The banking scandal threatened to engulf Whitehall and the heart of the City last night after Barclays effectively accused the Bank of England of encouraging it to rig a key interest rate.

Custom byline text:

Kate Devlin UK Political Correspondent

The allegation came on a day of turmoil in the Square Mile after Barclays chief executive Bob Diamond quit over Barclays involvement in fixing the Libor interest rate at which banks lend to each other.

The Bank of England was dragged into the crisis after Barclays released a memo in which Mr Diamond appeared to suggest Paul Tucker, the Deputy Governor, pushed him to massage the rate during the 2008 banking crisis. The document was released ahead of what is expected to be an explosive appearance by Mr Diamond before the House of Commons Treasury Committee today.Last night, former Labour chancellor Alistair Darling denied the Treasury had pressured the Bank of England to get the rate down. The MP denounced rate rigging as "reprehensible" and said: "I would find it absolutely astonishing that the bank would do that." He called for Mr Tucker to follow Mr Diamond in appearing at the committee, which is investigating allegations of rate fixing. Barclays' outgoing chairman Marcus Agius also admitted he had known about the rate-fixing claims for two years as the Financial Services Authority and other agencies investigated his bank. The development came as it emerged that bankers north of the Border could face criminal prosecutions. The Crown Office announced it has been investigating the Scottish banking sector and would extend its inquiries as a result of "recent developments". It was also announced that MPs will vote tomorrow on calls for an independent public inquiry into the scandal, after Labour condemned the Prime Minister's plans for a parliamentary probe. The Treasury also launched a consultation on a possible new criminal offence covering serious misconduct in bank management.Meanwhile, Barclays' chief operating officer Jerry del Missier also resigned while Mr Diamond faced calls to give up a payout of £30m he is thought to be due after leaving.Later the company released a 2008 memo from Mr Diamond to Mr del Missier and another senior colleague in which he appeared to suggest the Bank of England had encouraged him to manipulate the rate. In the note, Mr Diamond reports on a discussion he had with Mr Tucker. He wrote: "Mr Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always towards the top end of Libor pricing."He added that Mr Tucker had also told him that it did not always "need to be the case that we appeared as high as we have recently".Barclays said that Mr Diamond did not believe that he had received an instruction from Mr Tucker or that he had passed on any instruction to Mr del Missier."However, Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters," the bank added. The Bank of England last night declined to comment.

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis. If you're a relatively new user then your comments will be reviewed before publication and if we know you well then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules, which are available here.

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

Bank of England dragged into Libor row

Commenting & Moderation

MOST READ

SPONSORED LINKS

MOST COMMENTED