BoE Tucker demands appearance at 'bank scandal' hearing as Osborne claims 'Labour involved'

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Wednesday, 04 July 2012 19:45

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By G.A.Ponsonby
 
Bank of England deputy Paul Tucker has made a request to attend the hearing in front of the Treasury Select Committee as speculation continues to grow over the identity of the senior Whitehall officials referred to in the Bob Diamond Barclays memo.
 
The request from the BoE official to appear "as soon as possible" follows the publication of an internal memo from ex Barclays head Bob Diamond in which the former bank chief appeared to claim that senior Whitehall officials had suggested Barclays LIBOR rates should be brought down.

According to a statement released by the Bank of England, Mr Tucker is "keen to clarify the position with regard to the events involving the Bank of England, including the telephone conversation with Bob Diamond on 29 October 2008".

The request from the senior BoE official follows an appearance at the Committee by former Barlcays head Bob Diamond.  In repeated questioning, Mr Diamond refused to be drawn on who the senior Whitehall official, or officials, referred to by Mr Tucker might be.

The hearing in front of a Committee of MPs follows revelations that the LIBOS rate, used by banks in order to set the level of interest each pays when borrowing from one another, has been manipulated between 2005 and 2009.

It has also emerged that UK regulators were warned five times from 2007 of problems with the rate, but took no action.

Speaking today, Mr Diamond denied Barclays had been slow to act to address rate rigging by its traders and said: "As soon as we recognised [the problem] three years ago... we said 'let's get to the bottom of this'".

Mr Diamond insisted that his bank had co-operated with the UK Financial Services Agency and both the UK and the US regulators had "applauded our co-operation".  Mr Diamond revealed that Barclays had in fact made repeated requests for action to be taken with respect to rate rigging.

"There was an issue out there and it should have been dealt with." he added.

However, in a sensational development it has emerged that Chancellor George Osborne has accused former Prime Minister Gordon Brown and other Labour Ministers of being involved in LIBOS rate rigging in 2008.

In an interview to be published by the Spectator Magazine tomorrow, Mr Osborne is quoted as saying:

"As for the role of the Labour government and the people around Gordon Brown - well I think there are questions to be asked of them,” he says, and adds:

"They were clearly involved and we just haven’t heard the full facts, I don’t think, of who knew what when."

He continues, "My opposite number was the City minister for part of this period and Gordon Brown’s right hand man for all of it.  So he has questions to answer as well.  That’s Ed Balls, by the way."

Yesterday, in an interview with Channel 4, former Chancellor Alistair Darling denied knowing about the phone call between Mr Tucker and Mr Diamond in which the BoE deputy is described as having referred to senior Whitehall officials being concerned at Barclays LIBOR rate.

However the Labour MP admitted that his government had been concerned about the level of the LIBOR rate and had deliberately attempted to bring it down through, he claimed, policy changes.

Responding to the testimony of Mr Diamond, the SNP’s Treasury Spokesperson Stewart Hosie MP said the evidence from the former Barclay’s Chief Executive raised more questions than answers about what was known by Labour Ministers –  particularly former Chancellor Alistair Darling, who was in charge at the Treasury at the time of the LIBOR rate-rigging scandal.

Mr Hosie, a member of the Treasury Select Committee, questioned Mr Diamond on allegations contained in an internal Barclays memo that "senior" Whitehall sources appeared put pressure on Barclays via the Bank of England to artificially lower lending rates.

Mr Diamond did not name the senior officials or Ministers involved.  However the former Chief confirmed, after discussion with Paul Tucker from the Bank of England, that former CEO John Varley was asked to speak again with Ministers or officials at Whitehall.

In the interview with Channel 4 news, Mr Darling would not confirm whether a Treasury Minister official or aide had not made the calls to the Bank of England about the Barclays LIBOR rate, simply saying there was "no evidence" of this.

Mr Hosie said:

"This was the first step in unravelling this appalling interest rate rigging scandal, but it raised more questions than answers.

"As Bob Diamond admitted, the fixing of LIBOR interest rates was reprehensible behaviour which has dealt a further devastating blow to the reputation of the banking sector.  It also confirms the staggering level of economic mis-management by former Labour Ministers at a time of financial crisis.

"The scandalous LIBOR activities do not stop with Barclays and we need a full, open and wide-reaching inquiry taking evidence from the banks, the regulators, and the Ministers in charge.

"The key unanswered question is did Chancellor Alistair Darling know “senior Whitehall sources” were discussing this matter with the Bank of England and he must account for what happened while he was in office.

"It really would be extraordinary if neither the FSA or the Bank of England or the Treasury, under Alastair Darling, knew what was going on.

"Even Ed Milliband has admitted Labour did not get the regulations right. Their economic mismanagement allowed this scandal to happen, but it is not yet clear whether their culpability runs deeper than simply incompetence.

"This is a serious issue with major question marks remaining about the conduct of the banks, the regulators and the Labour Ministers in office at the time. For this reason, it should be a judge led and wide-reaching inquiry to root out the issues and bring all parties involved to account.

"The implications of this rate fixing scandal are wide-reaching and no stone must be left unturned to get to the bottom of this appalling scandal.”