A secret recording reportedly implicates the Bank of England in LIBOR fixing

A secret recording of two former Barclays bankers allegedly puts Britain’s central bank in the middle of the LIBOR fixing scandal that rocked the country, says the BBC.

In the recording from 2008, one banker claims that the Bank of England pressured huge commercial banks to keep LIBOR rates low.

LIBOR — or the London interbank offered rate — is the daily measure showing the rate at which banks will lend to each other. It is used to set the price of hundreds of trillions of dollars worth of financial products.

The rate was rigged by traders from numerous banks, who agreed amongst themselves to submit rates that were either higher or lower than the rate should actually have been. It allowed them to make more money on trades.

Since the scandal first came to the public’s attention in 2012, the Bank of England has consistently said it did not know until much later about LIBOR rigging and of the practice of low-balling, as the submission of inaccurate Libor rates was called.

However, the recording from 2008 uncovered by BC Panorama appears to contradict the BoE’s claim. The transcript of the secret recording between a senior Barclays manager, Mark Dearlove, and LIBOR submitter Peter Johnson states that Barclays had “some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.”

Here is a key part from the recording, as detailed by the BBC:

[Dearlove] “The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.”

Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash.

Mr Johnson says: “So I’ll push them below a realistic level of where I think I can get money?”

His boss Mr Dearlove replies: “The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing… I am as reluctant as you are… these guys have just turned around and said just do it.”

Dearlove did not respond to the BBC for comment. Johnson, who was at Barclays for 35 years, was sentenced to 4 years in prison last summer after pleading guilty to accepting trader requests to manipulate Libor.

The BoE gave the BBC the following statement:

“Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.

“Nonetheless, the Bank of England has been assisting the SFO’s criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO.”

Business Insider has asked the BoE for further comment. You can read and watch the BBC’s full report here.

In November last year, the BBC and the Times and court documents claimed senior figures at the BoE knew about the rigging of LIBOR as early as mid-2007.

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