SENIOR LABOUR Party figures put pressure on the Bank of England to get Barclays to cut its Libor inter-bank borrowing figures during the height of the 2008 financial crisis, it has been alleged.
The revelations have come from a contemporaneous note kept by Barclays chief executive, Bob Diamond, of an October 2008 conversation with Bank of England deputy governor Paul Tucker. Mr Diamond quit his post yesterday morning, influenced perhaps by a call late on Monday night between Barclays chairman Marcus Agius and chancellor of the exchequer George Osborne.
Equally, however, Mr Diamond’s standing with the Barclays’ board was undermined after Bank of England governor Sir Mervyn King made it known privately that he would “be happy” if he left.
In Mr Diamond’s note of the conversation with Mr Tucker, the central banker said he had “received calls from a number of senior figures within Whitehall” questioning Barclays’ Libor pricings.
During the period, Barclays’ Libor pricings were consistently higher than those all of the other 15 banks who offered the daily prices used to set the daily rate, which is used as the benchmark for loans to customers worldwide.
“Mr Tucker stated the levels of calls he was receiving from Whitehall were ‘senior’ and that, while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently,” Mr Diamond’s note records.
Last night, sources close to Mr Diamond, who is deeply angry about losing his position, said the Tucker record was “only the third note to file” he made in his career.
In a detailed statement last night, Barclays said Mr Diamond had “relayed the contents” of the conversation to Jerry del Missier, who subsequently became chief operating officer – and who also quit yesterday.
“Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However, 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,” the bank said.
The del Missier instruction had no effect, the bank claimed, because its later lower quotes were still too high to be included in calculations, which are made after the top four and lowest four submitted quotes are excluded.
Responding to Mr Diamond’s resignation, Mr Osborne said he had been told of it on Monday night by the Barclays chairman.
Mr Agius had announced his own resignation before Mr Diamond’s future was decided, but reversed it to become Barclays’ full-time chairman, at least in the short term, as the bank looks to find Mr Diamond’s replacement.
Clearly feeling persecuted as the first bank to settle with US and UK regulators, Barclays said: “It is ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.”
Barclays has spent £100 million investigating the Libor breaches, which began in 2005 when quotes were lowered to improve the bank’s margins on other trades.
Some 22 million documents have been examined, along with more than one million audio files, while 75 detailed interviews were held with staff and former staff.
“The bank’s exceptional level of co-operation was expressly recorded by each of the authorities, and was described by the [US Department of Justice] as ‘extraordinary and extensive, in terms of the quality and types of information provided’. . . That co-operation has led to Barclays being the first to reach resolution of these issues,” Barclays said.
