The Bank of England reportedly put pressure on UK banks to lower their Libor rates in the wake of the financial crisis, according to a secret recording published by the BBC on Monday.
The recording shows senior Barclays manager, Mark Dearlove, telling the bank’s Libor submitter Peter Johnson to give an artifically lower rate. Dearlove repeatedly says that he is under pressure from both the UK government and the Bank of England to keep rates as low as possible.
Johnson is heard to object in the conversation, saying that this would mean breaking the rules for setting Libor, which should be based solely on the cost of borrowing cash.
At the time the Libor rate, the official rate at which banks lend money to each other, was reached by asking a Libor submitter from each bank to estimate what interest rate they thought the bank would have to pay to borrow money. An average of all submissions was the taken and the Libor rate set – but there has been substantial evidence of Libor submitters being influenced to give artificially low rates.
The recording contradicts evidence given to the Treasury select committee in 2012 by former Barclays boss Bob Diamond and Bank of England deputy governor Paul Tucker, who both said that they had only recently become aware of the practice.
The recording was played by BBC’s Panorama to Chris Philp MP, who sits on the Treasury committee, who told the programme: “It sounds to me like those people giving evidence, particularly Bob Diamond and Paul Tucker were misleading parliament, that is a contempt of parliament, it’s a very serious matter and I think we need to urgently summon those individuals back before parliament to explain why it is they appear to have misled MPs. It’s extremely serious.”