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Tucker denies knowledge of LIBOR ‘cesspit’

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11/07/2012
Bank of England deputy governor Paul Tucker has denied being asked by government officials to encourage banks to lower LIBOR submissions at the height of the crisis in 2008.

Addressing the Treasury Select Committee yesterday, Tucker (pictured) said a note made by former Barclays CEO of a conversation he had with the deputy governor on 29 October 2008 gave “the wrong impression” in parts.

Tucker said “absolutely no” government minister or official had suggested he lean on Barclays to lower its submissions in 2008. The note was released by Barclays last week amid a political storm over the bank’s manipulation of LIBOR rates.

According to the deputy governor, the conversation centred on his concerns over Barclays’ funding position, and its apparent willingness to pay higher rates of interest in the money markets, rather than its LIBOR submissions.

“[The note] should have said 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?'”

He added he had no knowledge of banks colluding to lower LIBOR until the revelations of recent weeks, despite concerns being flagged to the Bank in 2007.

“This was a cesspit [but] we were not aware of it, other than what is starting to come out in these investigations. We didn’t have any knowledge, I didn’t have any knowledge.”

Tucker suggested he viewed these concerns over artificially lower rates as signs of a market that was “dysfunctional and illiquid” rather than one characterised by dishonesty.

Barclays chairman Marcus Agius, now leading the search for Diamond’s successor following his resignation last week, will face the committee at 10:00 this morning.

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