By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — On a day when both the chief executive and chief operating officer of Barclays PLC resigned over an interest-rate fixing scandal, the U.K. bank released its own version of events and suggested Tuesday that Bank of England and Federal Reserve officials were well aware of the issue.
Barclays was fined roughly $450 million for fixing Libor. Other banks also are being probed.
Barclays released a memo by Diamond written after a phone call with Paul Tucker, the Bank of England deputy governor. The memo, from October 2008, states that “Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always toward the top end of the Libor pricing. His response was ‘you have to pay what you have to pay.’ 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.’”
Whitehall is shorthand for the British government, as it’s a street with several key government ministries.
Later, the memo reads: “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.”
That instruction was then taken by Jerry del Missier, who resigned Tuesday as chief operating officer and then was president of Barclays Capital, as an instruction from the Bank of England not to keep Libor so high, the bank said. Del Missier relayed that view to the bank’s Libor submitters.
Barclays also said in the document that the lender believed other banks were making Libor submissions that were too low during the credit crunch. “The evidence shows that the intent was to protect Barclays from the unfounded negative perceptions by bringing Barclays Libor quotes closer to the pack but not to affect the ultimate rate,” the bank said.
Barclays also cited subsequent research by the New York Federal Reserve staff members that, according to the lender, concluded that banks’ Libor quotes were systematically below their borrowing rates by 39 basis points after the Lehman bankruptcy. “Barclays own submissions for tenors of 1 month to 1 year Libor were higher than actual Barclays trades on 97% of the occasions when Barclays had actual trades during the financial crisis,” the lender said.
Separately, British newspaper The Independent reported that the parliamentary committee investigating Diamond may call on Tucker to give evidence.
The Barclays documents, however, don’t suggest regulatory knowledge of the other half of the Libor scandal, involving trader requests to manipulate Libor submissions for their own positions. Barclays said those activities were “promptly disclosed” and that there was no knowledge by anyone above desk supervisor level.
Libor is enormously important to the financial system — the notional value of three-month eurodollar futures which are based on it was $564 trillion in 2011, and swaps of $350 trillion and interest-rate derivatives based on the related Euribor had a notional value of $220 trillion, according to data from the Commodity Futures Trading Commission.
