The LIBOR scandal reemerged yesterday as the BBC’s Panorama uncovered a secret recording implicating the Bank of England in the interest rate manipulation saga.
According to the BBC the central bank pressured commercial banks during the 2008 financial crisis to lower their settings for LIBOR.
In a telephone recording, aired last night in the UK, a senior Barclays manager, Mark Dearlove, can be heard instructing Libor submitter Peter Johnson, to lower his rates.
Mr Johnson: “So I’ll push them below a realistic level of where I think I can get money?”
Mr Dearlove: “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.”
The Barclays submitter, Peter Johnson, who is featured in the phone call was jailed in 2016 after pleading guilty to accepting requests to manipulate LIBOR.
Previous assurances from the Bank of England that they were not involved in LIBOR fixing have now come under question again.
It has long been rumoured that the LIBOR fixing went higher than the banks and individuals that were originally implicated.
In 2012, a 2008 telephone note came to light which recorded a phone call between Paul Tucker, executive at the Bank of England at the time and Barclays’ boss Bob Diamond.
The note refers to what is apparently LIBOR not needing to be ‘so high’ as instructed.
The telephone note was taken on the same day that the Panorama aired phone call between Johnson and Dearlove, took place.
Despite the published telephone note, Bob Diamond told the Treasury Select Committee in 2012 that he had only recently became aware of the manipulations.
Chickens coming home to roost
Last week there were also new revelations in a newly published book by David Enrich, ‘The Spider Network’ in which Tom Hayes of UBS tells Enrich “This goes much much higher than me and a lot of what I know…”
Tom Hayes’ bosses were happy to accept his LIBOR fixing in exchange for higher commissions until the CFTC investigation came along. They promptly threw him under a bus and he rightly ended up in prison. However there was little implication for seniors at UBS and of course, the Bank of England.
It is amazing how many times junior employees seem to take the rap by themselves – as if there has been no instruction or oversight from their managers. In the banking world, the lone ‘rogue trader’ is a very common little beast indeed.
Hayes has repeatedly claimed that the real culprits are not the executors of the rigging but those higher up the chain who had instructions to do so.
As a result very little was done at the BOE following the fallout to LIBOR. Some staff quietly left their jobs but there were no charges brought against BOE employees.
By manipulating LIBOR, bankers (and seemingly central bankers) pushed up the cost of borrowing for ordinary people. LIBOR was not regulated in either the UK, US or anywhere else. This appears to be an almost line of defence for the Bank of England who only have to provide information on a voluntary basis to the Serious Fraud Office, as part of a new investigation.