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July 04, 2012 at 05:44 AM
Bob Diamond may have resigned as CEO of Barclays, but he’s not going quietly, and he may take some people at the Bank of England (BoE)—and elsewhere—down with him. Documents released by the bank indicate that he may have been given tacit approval by Paul Tucker, deputy BoE governor, to adjust Libor rates to be more in line with other banks after Whitehall expressed concern lest Barclays appear to be in trouble.
A Financial Times report on Wednesday said that the bank published a document prior to Diamond’s expected appearance before Parliament indicating that the issue of Libor rates had been the subject of a conversation with BoE. During October of 2008, according to the document, Barclays’ published Libor submission in the wake of the Lehman Brothers collapse was the highest among all banks submitting their rates to determine the Libor rate.
According to the document, “Barclays did not understand why other banks were consistently posting lower submissions” and did not believe their costs were so much lower than Barclays’ own. Further, the document says that Barclays had raised the issue repeatedly with authorities.
“On 29 October 2008, Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England,” said the document. While “Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier,” the document continues, “…Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters.”
In an addendum to the document, a note is appended recording Diamond’s perception of the call—one of only three “notes to file,” according to the FT, that Diamond made during his whole career. In that note, Diamond says that Tucker had relayed concerns from “senior figures within Whitehall” that Barclays was consistently in the high end of Libor pricing.
Diamond’s note says, “I asked if he could relay the reality, that not all banks were providing quotes at the levels that represented real transactions, his response ‘oh, that would be worse.’”
Tucker went on to say, according to the note, that “the levels of calls he was receiving from Whitehall were ‘senior’ and 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 had recently.”
The next day, Barclays’ submission of Libor borrowing rates dropped substantially.
Tucker is considered the front-runner to replace Mervyn King, current BoE governor, when his term expires in June of 2013. Alistair Darling, who was finance minister at the time, said in a Reuters report that he could not imagine BoE suggesting to Barclays that it do any such thing and further said that his department would never “suggest wrongdoing like this.”
