The deputy governor of the Bank of England (BoE) has said he did not give Barclays instructions to lower its Libor submissions in 2008. Paul Tucker said no government minister had asked him to lean on Barclays over its inter-bank lending rates. But he also told MPs that the BoE and the government feared that Barclays may need a bailout.
Ex-Barclays boss Bob Diamond's account of a conversation between the two gave the wrong impression, Mr Tucker said. That telephone conversation, which took place on 29 October 2008, has come under much scrutiny.
Mr Diamond's note of the call concluded by saying Mr Tucker had stated that it did not always need to be the case that we appeared as high [with Libor submissions] as we have recently.
Tucker told the Treasury Select Committee that, unlike Mr Diamond, he had not made a note of the conversation. Sitting here, I greatly wish I had taken a note of it, he said. I think the last sentence gives the wrong impression, he said.
It should have said something along the lines of: 'Are you ensuring that you, the senior management of Barclays, are following the day-to-day operations of your money market desk, are you ensuring that they don't march you over the cliff inadvertently by giving signals that you need to pay up for funds?'
Emails released earlier on Monday revealed that the BoE had almost daily contact with Barclays over inter-bank lending at the end of October 2008. At this time, during the height of the financial crisis, Barclays was trying to manipulate Libor rates by submitting lower borrowing rates.
These rates, submitted by a number of banks, go into calculating the daily Libor, or London inter-bank lending rate, which is the basis for millions of daily financial transactions.
Mr Tucker, who had last week requested a hearing with the Treasury Select Committee as soon as possible, was asked if any government official or minister in 2008 had asked him to lean on Barclays or any other bank to lower their Libor submissions.
Specifically, he was asked about Shriti Vadera, an adviser to then-Prime Minister Gordon Brown, and shadow chancellor Ed Balls, who was then a Labour minister. His response each time was absolutely not.
He added: I don't think I spoke to Shriti Vadera throughout this period at all.
While he said the BoE did not think Barclays was doomed in 2008, he said there was anxiety about the bank's funding position. Tucker said there was concern that after RBS, HBOS and Lloyds had to be bailed out by the government in the middle of October 2008, Barclays could be next in line.
Mr Tucker said he was not aware of any Libor manipulation at the time, but now realised the Libor market was a ”cesspit”. (BBC)