Bank of England exec denies pressure on Barclays

LONDON—A senior Bank of England official denied yesterday that he had given any hint to Barclays that it should manipulate reports of its borrowing costs. Paul Tucker, the Bank of England’s deputy governor, also told UK lawmakers on the House of Commons Treasury Committee that no one in government had leaned on him to put pressure on Barclays to “lowball” its reporting. Barclays has been fined US$453 million by US and British agencies for feeding false data which went into calculations of the London interbank offered rate (LIBOR), a key market index which influences the costs of a wide range of financial instruments, including home mortgages.
Tucker’s testimony was significant in shedding further light on the rate-fixing scandal which shocked the financial world, and because it was Tucker’s chance to give his version of a conversation with former Barclays CEO Bob Diamond on October 29, 2008.

Any hint that Tucker encouraged any false reporting—the conclusion which some people drew from Diamond’s version—could fatally undermine the Bank official’s position as a leading candidate to succeed Mervyn King as governor next year. As part of his evidence to committee last week, Diamond produced a memo saying Tucker had told him in a phone conversation “that while he was certain we (Barclays) did not need advice, that it did not always need to be the case that we appeared as high as we have recently.” Tucker said Diamond’s account of events gave the wrong impression and that his conversation with the Barclays chief was “something along the lines of: ‘Are you ensuring that you, the senior management of Barclays are following the day-to-day operations of your money market desk, your treasury; are you ensuring that they don’t march you over the cliff inadvertently by giving signals that you need to pay up for funds.’” Unlike Diamond, Tucker said he had not made a note of the conversation at the time. “There were too many conversations, there were too many things going on,” Tucker said. In the wake of the fines, Diamond resigned and Barclays Chairman Marcus Agius announced that he would go as soon as his successor was chosen. Treasury committee chairman Andrew Tyrie challenged Tucker about a meeting with bankers in November 2007 which Tucker chaired. The minutes recorded that “several group members thought that LIBOR fixings had been lower than actual traded interbank rates through the period of stress.”

However, Tucker said the meeting took a differenct interpretation: “Well, we thought it was a malfunctioning market, not a dishonest market.” Diamond last week gave his version of a conversation with Tucker about why Barclays was quoting higher rates than other banks. Diamond’s version raised questions about whether Tucker—then the Bank of England’s executive director for markets—had in any way encouraged Barclays to cheat on its rate submissions. A note recorded by Diamond, which was submitted to Treasury Committee last week, said Tucker initiated the call, saying senior government officials were wondering why Barclays was reporting higher borrowing rates than other banks. The implication, which also worried Barclays, was that this could be interpreted as a sign that Barclays was in financial difficulty and having trouble borrowing from other banks. (AP)