Barclays Libor emails published as Tucker faces MPs

Paul Tucker Paul Tucker spoke to Bob Diamond about the Libor rate back in 2008

The Bank of England (BoE) had almost daily contact with Barclays over inter-bank lending at the end of October 2008, newly released emails show.

At this time, during the height of the financial crisis, Barclays was trying to manipulate Libor inter-bank rates.

The BoE's knowledge of its actions will be the subject of MPs' questions to deputy governor Paul Tucker later.

Barclays claims some of its staff acted on the understanding the BoE had asked it to reduce its Libor submissions.

Former Barclays chief executive, Bob Diamond, resigned last week over the scandal, along with chief operating officer Jerry del Missier.

Mr Diamond's notes of a telephone conversation he had with Mr Tucker led Mr del Missier to think the Bank of England had sanctioned it submitting lower borrowing rates, Barclays said.

Regulators said Barclays had submitted lower rates during the financial crisis to reduce the appearance that it was having trouble raising funds, as a higher cost of borrowing indicates other banks are concerned about its financial position.

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.

Government involvement

The latest emails from the time also show how concerned the government was about the high cost of borrowing in the banking sector.

Paul Tucker

  • Mr Tucker, 54, has worked at the Bank of England since 1989
  • During the financial crisis he was executive director of markets, in charge of all bank operations and financial stability
  • He was appointed deputy governor on 1 March 2009
  • He is a member of the Bank's rate-setting Monetary Policy Committee and its Court of Directors
  • He is also a member of the G20 Financial Stability Board's Steering Committee
  • During the 1980s, he worked as a corporate financier at a merchant bank and on projects to reform stock markets and regulation in Hong Kong after the 1987 crash
  • He studied maths and philosophy at Cambridge University

They include a series of messages between Mr Tucker and senior Downing Street official Jeremy Heywood, which show that the two discussed Libor on a number of occasions towards the end of October 2008.

There is no suggestion within the emails, however, that Mr Tucker put pressure on Mr Diamond to lower Barclays' Libor submissions.

The emails indicate that the government was concerned about banks' abililty to borrow.

Mr Heywood and Mr Tucker discussed why Barclays was reportedly borrowing money above the Libor rate.

In an email with the subject: "Might be scuttle butt - are you hearing this rumour?", the two men discuss why Barclays was doing this.

"Sterling 3m [3-month] Libor is high because Barclays bidding it... This has been going on for three weeks," Mr Heywood tells Mr Tucker.

"A lot of speculation in the market over what they are up to," he says.

'Nod, wink'

In notes released by Barclays last week, Mr Diamond said that in a phone conversation a week later, on 28 October 2008, Mr Tucker had told him that "senior figures within Whitehall" were concerned that Barclays' Libor rates were higher than some of the other main banks.

However, Mr Diamond subsequently said before the Treasury Committee that he did not consider that Mr Tucker was asking him to lower Libor.

Mr Diamond said: "I didn't believe it was an instruction."

The committee's chairman, Conservative MP Andrew Tyrie, then replied that to "almost anyone who looks at it", it appeared that Mr Diamond was being given "a nod and a wink".

Yet while Mr Diamond said he did not consider it to be an instruction, Barclays' Libor rates did subsequently fall.

Mr Diamond said this was because when the message was passed down to senior executive Jerry del Missier, he mistakenly concluded that an instruction had been given by the Bank of England not to keep Libor rates so high.

Speaking with the BBC, former Bank of England Monetary Policy Committee member Andrew Sentance said the Bank was "monitoring the level of Libor very closely at the height of the financial crisis".

But he said he "certainly didn't know anything [about rate fixing]."

Cable intervention

Meanwhile, Labour leader Ed Miliband has called on the government to introduce a code of conduct for bankers and to encourage greater competition in the banking sector.

On Sunday, Business Secretary Vince Cable told the BBC's Andrew Marr Show that Barclays should limit the pay-off that Mr Diamond receives.

Mr Cable said: "I think in view of what's happened, I would sincerely hope that the board of Barclays take a fairly strict view about this.

"There isn't anything government can directly do about it, but I think in view of the shame that has already been heaped on Barclays bank, I would be very surprised if the chairman and the board were to allow another outrage to occur."

Mr Cable also accused the UK's banks in general of "throttling" the UK's economic recovery, by failing to lend to small firms.

He said this was the "real problem" and that the government had to "focus single mindedly" on solving it.

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