Threatening the establishment? Bank of England dragged into Barclays scandal

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The alteration to Libor took place as observers panicked over the 2008 financial crisis.
The alteration to Libor took place as observers panicked over the 2008 financial crisis.

The Bank of England was dragged into the Libor scandal today, after a Barclays submission to parliament suggested the deputy governor demanded Libor rates be lowered.

In a written submission to the Treasury committee ahead of Bob Diamond's appearance tomorrow, the bank claimed chief executive Jerry del Missier understood the Bank of England wanted its Libor rating reduced to alleviate concerns about liquidity.

"On 29 October 2008, Bob Diamond received a call from Paul Tucker, the deputy governor of the Bank of England," the statement read.

"Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier.


"Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier," it continued.

"However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters."

The statement threatens to explode the scandal open, so that it spreads from Barclays to the rest of Britain's banks and the Bank of England itself – raising the possibility the entire financial establishment will be tarnished by the row.

The statement suggests many other financial institutions will be dragged into the scandal and that the culpability can be laid at the door of British financial watchdogs, who failed to take action.

"Barclays did not understand why other banks were consistently posting lower submissions [for Libor]," it read.

"Barclays firmly believed that the other panel members were not, in fact, funding at a lower cost than Barclays, and we were disappointed that no effective action was taken, notwithstanding our having raised these issues with various authorities during the whole financial crisis period."

It also states: "It is ironic that there has been such an intense focus on Barclays
alone, caused by our being first to settle in the midst of an industry-wide, global
investigation."

Both Diamond and del Missier resigned today.

Diamond appears at the Treasury committee tomorrow at 14:00 BST. politics.co.uk will be covering the event live, throughout the day.
 

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