Banking probe row turns political
- 3 July 2012
- From the section UK Politics
Update 8.14am: There is a key phrase in Barclays Bank's statement explaining Bob Diamond's resignation: "The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen." This will allow Labour to claim that their leader's call for him to resign had some effect.
Update 7.40am: I understand that the Treasury were informed last night about Bob Diamond's plan to resign as chief executive of Barclays. The chancellor has not spoken to him about this or in recent days but did speak to the chairman of Barclays Marcus Agius
Posted 6.59am: The BBC has seen documents which show that ministers in the last Labour government held discussions with banks about policies which would allow the Libor rate - the inter-bank lending rate - to fall.
The documents, which have also been seen by the Daily Mail, do not provide any evidence that politicians knew about, let alone condoned, the manipulation of the rate by bankers at Barclays or at other banks.
The evidence may, however, lead some to suggest that a climate was created in which banks believed they were under pressure from Gordon Brown's government to cut Libor.
They reveal discussions about how the credit guarantee scheme - a government scheme created in 2008 to help get credit to small and medium-sized businesses - would "allow Libor to fall quicker" than it otherwise would.
These discussions were led by Baroness Vadera, a former investment banker who advised Gordon Brown.
Sources in the last Labour government have told me that it was well known at the time that ministers wanted to do everything possible to reduce the cost of credit to help get the economy moving, but have stressed that this was totally different from allegations about the rigging of the market and lying about the Libor rate.
This argument is further evidence of how partisan the debate about banking has now become.
Labour want to portray the government as out of touch with public anger on banking whilst ministers want to present Labour as responsible for the mistakes of the past.
The new parliamentary inquiry into banking - if it is set up - will have the job of investigating the truth.