The Bank of England repeatedly urged commercial banks to lower their Libor settings during the financial crisis, according to a secret tape obtained by BBC journalists.
The 2008 recording adds to evidence that the central bank participated in one of the biggest rate-rigging scandals in history, the U.K.’s national broadcaster said in a report. The scandal rocked the financial industry when it was uncovered in 2012.
Libor, or the London Interbank Offered Rate, is the daily rate at which banks lend to each other. It is used to set the price of trillions of dollars worth of financial products, including mortgages and loans to retail customers.
In the recording, obtained by the BBC’s “Panorama” program, former senior Barclays BARC, +0.22% BCS, -0.74% manager Mark Dearlove instructs Libor submitter Peter Johnson to lower his Libor rates, citing pressure from the BOE.
“The bottom line is you’re going to absolutely hate this ... but we’ve had some very serious pressure from the U.K. government and the Bank of England about pushing our Libors lower,” Dearlove tells Johnson, according to the BBC.
Johnson objects, saying it’ll break the rules for setting the interest rate.
“The fact of the matter is, we’ve got the Bank of England, all sorts of people involved in the whole thing... I am as reluctant as you are... these guys have just turned around and said just do it,” Dearlove replies.
The episode of “Panorama” with the rest of the journalists’ findings is scheduled to air at 8:30 p.m. on Monday local time.
No oversight in 2012
The BOE has consistently said it wasn’t aware of the Libor manipulation until years after the rigging happened.
On Monday, in response to the BBC findings, the central bank noted that Libor and other global benchmarks weren’t regulated in the U.K. or elsewhere during the period in question.
“Nonetheless, the Bank of England has been assisting the [Serious Fraud Office’s] criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO,” the BOE said in a statement.
NYSE Euronext took over running the Libor benchmark in January 2014.
The rate-rigging scandal first came to public attention in 2012 when an international investigation revealed that several major banks — including Deutsche Bank DBK, -0.60% DB, -0.84% , Barclays, UBSG, +0.51% UBS, -0.19% Rabobank and the Royal Bank of Scotland RBS, +0.14% RBS, -0.17% — had colluded to manipulate Libor.
The SFO has brought charges against 19 individuals in relation to concerted fixing of Libor and of the separate Euribor benchmark. Of those, eight have been acquitted, four have been convicted and one pleaded guilty Two former Barclays employees were acquitted last week, concluding the fraud office’s last outstanding court case over the manipulation.
Johnson, the Libor submitter heard on the secret tape, was jailed last year after pleading guilty to conspiracy to defraud in October 2014. Tom Hayes, a former bank trader at both UBS Group AG and Citigroup Inc., was found guilty in August 2015 of rigging Libor and sentenced to 14 years in prison, though the term was later reduced to 11 years.
The 2008 recording adds to evidence that the central bank participated in one of the biggest rate-rigging scandals in history, the U.K.’s national broadcaster said in a report. The scandal rocked the financial industry when it was uncovered in 2012.
Libor, or the London Interbank Offered Rate, is the daily rate at which banks lend to each other. It is used to set the price of trillions of dollars worth of financial products, including mortgages and loans to retail customers.
In the recording, obtained by the BBC’s “Panorama” program, former senior Barclays BARC, +0.22% BCS, -0.74% manager Mark Dearlove instructs Libor submitter Peter Johnson to lower his Libor rates, citing pressure from the BOE.
“The bottom line is you’re going to absolutely hate this ... but we’ve had some very serious pressure from the U.K. government and the Bank of England about pushing our Libors lower,” Dearlove tells Johnson, according to the BBC.
Johnson objects, saying it’ll break the rules for setting the interest rate.
“The fact of the matter is, we’ve got the Bank of England, all sorts of people involved in the whole thing... I am as reluctant as you are... these guys have just turned around and said just do it,” Dearlove replies.
The episode of “Panorama” with the rest of the journalists’ findings is scheduled to air at 8:30 p.m. on Monday local time.
No oversight in 2012
The BOE has consistently said it wasn’t aware of the Libor manipulation until years after the rigging happened.
On Monday, in response to the BBC findings, the central bank noted that Libor and other global benchmarks weren’t regulated in the U.K. or elsewhere during the period in question.
“Nonetheless, the Bank of England has been assisting the [Serious Fraud Office’s] criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO,” the BOE said in a statement.
NYSE Euronext took over running the Libor benchmark in January 2014.
The rate-rigging scandal first came to public attention in 2012 when an international investigation revealed that several major banks — including Deutsche Bank DBK, -0.60% DB, -0.84% , Barclays, UBSG, +0.51% UBS, -0.19% Rabobank and the Royal Bank of Scotland RBS, +0.14% RBS, -0.17% — had colluded to manipulate Libor.
The SFO has brought charges against 19 individuals in relation to concerted fixing of Libor and of the separate Euribor benchmark. Of those, eight have been acquitted, four have been convicted and one pleaded guilty Two former Barclays employees were acquitted last week, concluding the fraud office’s last outstanding court case over the manipulation.
Johnson, the Libor submitter heard on the secret tape, was jailed last year after pleading guilty to conspiracy to defraud in October 2014. Tom Hayes, a former bank trader at both UBS Group AG and Citigroup Inc., was found guilty in August 2015 of rigging Libor and sentenced to 14 years in prison, though the term was later reduced to 11 years.
