Report claims BoE pressured banks to lower Libors during 2008 crisis

The Bank of England repeatedly pressured commercial banks to lower their settings for the benchmark London interbank offered rate during the 2008 financial crisis, according to BBC reports.

The report cited a secret recording in which a senior manager at a large UK bank instructed a Libor submitter to lower his rates.

“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,” the BBC cited the manager as saying on the recording.

The BOE has said that Libor and other global benchmarks were not regulated in the UK or elsewhere during that period. The central bank added that it had been assisting the Serious Fraud Office’s investigations into Libor manipulation.

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Banks have paid more than $9 billion in fines to settle accusations they rigged the benchmark Libor rate, used to value trillions of dollars worth of financial products.

Criminal fraud investigation

The Bank of England said it would not publish details of its dealings with banks that rigged market interest rates at the height of the financial crisis until a lengthy criminal fraud investigation has concluded.

The information in the recording largely echoes facts uncovered in investigations in 2012 by parliament and Britain’s now-defunct Financial Services Authority. Those led to a record fine for Barclays and the resignation of its chief executive Bob Diamond, its chairman and chief operating officer.

The scandal involved a total of 11 banks and brokerages and raised questions about the relationship between the Bank of England and banks in the run-up to the crisis. It also triggered new laws explicitly to criminalise setting inaccurate market interest rates, and a series of probes by Britain’s Serious Fraud Office which have brought five convictions and some unsuccessful prosecutions.

“The bank is committed to publishing materials relating to the SFO’s investigations into benchmark manipulation when it is appropriate to do so,” the Bank of England said in a statement.

The Bank of England said Libor and other global benchmarks were not regulated in Britain during the period in question. Barclays’ then chief operating officer, Jerry del Missier, told a British parliament committee in 2012 that following a conversation with Diamond in 2008, he understood that the BoE wanted Barclays to submit artificially low reports of its borrowing costs to reduce concerns about its financial health.

– (Bloomberg/Reuters)